To become an angel investor in the US, you usually need to be an accredited investor (over $200,000 a year in income, or $300,000 with a spouse or partner, for two years, or $1 million in net worth excluding your home), money you can afford to lose across many companies, and a steady source of deals.
I came to angel investing from the founder's side. I started four companies, raised three seed rounds and had two exits: MovieLaLa to Gfycat, and RemoteTeam to Gusto in 2021, 580 days after incorporation. I have made 234 angel investments, and Lenny's Newsletter ranked me the #1 most active angel investor in 2024 and #10 over the last five years. I'm an angel, not a VC: there is no fund and there are no LPs behind those checks.
This guide covers the general path for anyone with capital and curiosity. If you are a founder thinking about the switch, the more personal version is my path from founder to angel investor. Nothing here is investment advice; it explains how the process works.
Who qualifies as an accredited investor?
Most US angel rounds are private offerings under the SEC's Regulation D, and most of them are open only to accredited investors. As an individual, you qualify if any one of these is true, according to the SEC's accredited investor page:
Income: over $200,000 in each of the two most recent years, or over $300,000 together with a spouse or spousal equivalent, with a reasonable expectation of the same this year.
Net worth: over $1 million, alone or with a spouse or spousal equivalent, not counting your primary residence.
Professional licenses: a Series 7, Series 65 or Series 82 license held in good standing, a route the SEC added in 2020.
How you prove it depends on how the company raises. In a Rule 506(b) offering, which cannot be advertised publicly, founders usually ask you to confirm your status in a questionnaire. In a Rule 506(c) offering, which can be advertised, the company has to take reasonable steps to verify it, which in practice means a letter from your accountant or lawyer or a third-party verification service.
If you are not accredited, you are not shut out. Regulation Crowdfunding lets anyone invest in startups through SEC-registered funding portals, with annual limits tied to income and net worth. The deal flow is different from a typical angel round, but it is a legal way to learn. Outside the US, the tests are different, so check your own country's rules before you sign anything.
How much money do you actually need?
There is no legal minimum beyond qualifying. The practical minimum is set by check sizes: syndicates and platforms let you write small checks, while a direct investment in a company's round usually asks for more. How much money you need to start angel investing walks through the numbers in detail.
The more useful question is how to budget. Decide three things before your first check:
A yearly amount you can lose completely. Most startups fail, and an angel portfolio's returns usually come from a small number of outliers. If losing the whole year's budget would change your life, the budget is too big.
How many companies you will back over time. One or two checks is a bet, not a portfolio. Spread the same money across many companies over several years so one winner has the chance to carry the rest.
A reserve for follow-ons. Your best companies will raise again, and some will offer you the right to keep your ownership. Keeping part of the budget back lets you say yes.
Plan for the money to be locked up for a long time, often a decade or more. There is no market for most of these shares until the company is acquired or goes public. What an angel investor is and how angels make money explains how those exits turn into returns.
Where do first-time angels find deals?
Deal flow is the part nobody hands you. These are the usual ways in, roughly from easiest to hardest:
Syndicates. An experienced lead finds the deal, writes a memo and invites backers to join through a special purpose vehicle. You see a steady stream of companies and how a lead thinks about each one.
Angel groups. Members screen startups together, share diligence and often invest as a block. Expect membership dues and regular meetings. How to join an angel group or syndicate compares the two routes.
Your own network. Former colleagues leaving to start companies, founders you have helped, operators in your industry. These are often the best deals because you know the people.
Being useful in public. Founders send decks to people who have already helped them: someone who answered a hiring question, wrote clearly about a market or made an introduction. Reputation is deal flow.
Pick an edge you actually have. Mine is the founder and engineering side, since I'm a technical founder and an 8x startup CTO. Yours might be a market you sold into for years, a function such as sales or design, or a region. Founders let angels into crowded rounds when they bring something the cap table lacks.
How do you evaluate your first deals?
At the earliest stages there is little data, so the questions are about people and timing. Who are the founders, and why are they the ones to solve this? Is the market large enough that success would matter? Why is now the moment, and what changed? What will this round's money prove before the next raise?
Then read the paperwork. Many US pre-seed and seed rounds use a SAFE, which converts into shares at a later priced round; the valuation cap and any discount decide how much of the company your money buys. Priced rounds issue preferred stock with a set valuation. Ask who is leading, how much is being raised, and whether you get pro rata or information rights. If a term confuses you, ask the founder or a lawyer before you wire, not after.
Most early mistakes are behavioral rather than analytical: investing too much in the first deal, chasing a famous co-investor instead of the business, or skipping the reserve. The biggest mistakes first-time angel investors make lists them so you can avoid the expensive way of learning.
What does the first year look like?
Confirm that you qualify and how you will prove it.
Set your yearly budget, your target number of companies and your follow-on reserve, and write them down.
Join one or two syndicates and read every memo, including the ones you pass on.
Tell the founders and operators you know that you have started investing and what you can help with.
Write small first checks and keep a simple record of each one: the date, the amount, the instrument, the terms and the documents.
Keep your tax paperwork in order. Syndicate vehicles often send K-1 forms, and some gains may qualify for special treatment, so work with a tax adviser from the start.
Be the angel you would want: answer quickly, help when asked and stay out of the way otherwise.
Pace matters less than consistency. How I became the most active angel investor in 2024 describes what a high-volume year looks like, but nobody needs to start there. More guides are in the angel investing section, and the companies I have backed are listed on my angel investments page.
Frequently Asked Questions
Q:Can you become an angel investor without being accredited?
In the US, most private angel rounds require accredited investors. Non-accredited investors can still back startups through Regulation Crowdfunding portals, within annual limits set by income and net worth. Outside the US, each country has its own rules.
Q:How many startups should a new angel invest in?
Enough that a single failure doesn't decide the outcome. Because returns usually come from a few outliers, angels spread money across many companies over several years rather than placing one or two large bets. Smaller first checks make that possible.
Q:How long does it take to see a return?
Usually many years. Shares in a private startup can't normally be sold until the company is acquired or goes public, and that often takes a decade or more. Some companies never return money at all.
Q:Is an angel investor the same as a venture capitalist?
No. An angel invests personal money, usually at the earliest stages. A venture capitalist invests a fund raised from limited partners and is paid to manage it, so the two often have different check sizes, timelines and expectations.
Q:Do angel investors need to help the companies they back?
Nobody requires it, but help is what gets good angels into competitive rounds. The most useful help is specific: an introduction to a customer or a hire, or a quick answer to a hard question, rather than a weekly demand for updates.