CHAPTER 23
Owners, Angels, and Venture Capitalists
Private capital markets begin with early-stage equity investing. These investors come in many shapes and sizes, including operating owner-managers, angels, and venture capitalists (VCs). Each of these groups plays a different role in the funding process, and each expects something different from the investment. This chapter describes how early-stage investors approach the problem.
People have been funding their own business start-ups since commercial activity began. Funding in the United States began to institutionalize in the 1930s and 1940s when wealthy families, such as the Rockefellers and Bessemers, began investing in private companies. Thus began venture capital. These original investors were far from “angels,” but they had money, connections, and know-how. Perhaps the first venture firm was J.H. Witney & Company, which was founded in 1946 and survives to the present day. General Georges Doriot, a teacher and innovator from Harvard, institutionalized venture capital. In the early 1950s, he had raised money for a dedicated fund and realized tremendous returns from investments in Digital Equipment Corporation and other early technology titans. Finally the U.S. government entered the early-stage investing picture, when in 1958 it launched Small Business Investment Companies via the Small Business Administration.
More modern angel investors tend to be wealthy investors who wish to participate in high-risk deals to satisfy some ...
