Investing in a new venture can be an exciting process. If you have the ability to support a new startup, it can potentially be a financial windfall and an opportunity to help support a new project early on. Today, it’s estimated that around 300,000 Americans are angel investors and it continues to grow.

However, getting involved in angel investing isn’t always easy. The United States’ Securities and Exchange Commission (SEC) allows only accredited investors to participate. This means only investors with at least $1 million or have an annual income of more than $200,000 for the past two years and can practically expect the same for the current year. The threshold to become an angel investor for a married couple is a combined annual income of over $300,000.

We all don’t have the income of the top 1 percent of investors, so it might be wise for the majority of angel investors to join an investment group, even if you meet the SEC’s criteria. This way, new angel investors can share the due diligence responsibilities and the initial seed capital.

Traditional Angel Investment Funds

Early-stage investors can find many angel funding groups in the United States. Over the past two decades, the options have multiplied. In 2019, Angel Capital Association membership counted 275 angel groups.

However, it always helps to secure personal connections since membership to these groups is usually invitation only. That doesn’t mean emerging angel investors are out of luck. Some groups will allow new angels to participate in a few meetings as a guest. If they sense a commitment to the investment industry and what you bring to the table, they may ask newcomers to join. Additionally, many investor groups include membership fees, usually around $1,000 or more per year and hold monthly or quarterly meetings where they hear pitches from entrepreneurs in need of capital.

The Benefits of Joining an Angel Group

There are some crucial reasons why this team approach is popular amongst today’s angel investors. Many young companies seek more cash than any single investor is willing to give, often over $1 million. By splitting up the ownership amongst several investors, an individual may only need to kick in around $25,000 to $50,000 on each deal. If they band together, investors can also split up the due diligence work that is required on each investment. It saves time and allows funders to refer to each other’s experience and expert backgrounds. The decision to invest in any business is still at the discretion of the individual, but prospective investors can source feedback from others in the group before they decide to invest. Perhaps the biggest benefits of joining a group is the opportunity to learn more about the investment process and source more deals. The whole process can be a high-risk, high-reward scenario. Many experts suggest securing a portfolio of at least ten companies to protect your money. It helps to have a steady stream of leads coming in, which is often hard to achieve if you’re getting involved in the angel investment process by yourself.

Online Investing Groups

Many investors like the idea of joining a group, but some don’t want to commit to a traditional investing group. Thankfully, there are alternatives through online syndicates like AngelList, which allow high-net-worth individuals to collaborate on deals and often with no annual fees or meetings.

Online groups are also desirable to investors who aren’t ready to put up large sums of cash. Some groups let you contribute as low as $1,000 to a single business venture, lowering the risk. Lead investors will put up a substantial amount of the capital, often around 20 percent, so the other members can offer smaller amounts. The other investors then compensate the lead with a “carry” —  a percentage of the profit from their investment. Some syndicates cover a relatively wide range of deals and others specialize in their own specific industries, like healthcare or space. The ACA website is a great start to connect with other investors in various fields. You can browse a directory of traditional and online groups throughout the United States.

If you’re new to angel investing, joining a group can help you find a partner on deals and balance out the amount of work required for each deal. With online syndicates, new angel investors don’t necessarily need to meet in person with other members to get the opportunity to find an early-stage investment opportunity. The benefits of angel investments are more than three-fold, though. Becoming an angel investor means researching your options, maximizing your retirement income, taking advantage of minimized investment taxes, but also becoming a supportive player in a worthwhile investment project within an industry in which you’re passionate.