Key Takeaways

  • Angel investors are often accredited, meaning they meet income or net worth thresholds, but newer regulations allow some non-accredited investors to participate.
  • Investing involves high risk and illiquidity—successful angels often diversify their portfolios.
  • Angels usually invest in sectors they know and seek teams with vision, execution ability, and market potential.
  • Joining angel groups provides valuable learning, networking, and deal-flow exposure.
  • Due diligence, exit strategy understanding, and alignment with founders are key evaluation practices.

Angel investor requirements include having:

  • A liquid net worth of at least $1 million.
  • The time and patience for the long term.
  • The relevant experience to understand the field.
  • The right community around you to help you learn.

Becoming an Angel Investor

Accredited investors are those with an annual income of $200,000 or a net worth of at least $1 million, excluding a primary residence. Companies that raise money from accredited investors are not subject to many of the securities filings with the U.S. Securities and Exchange Commission (SEC) and state regulatory bodies. Therefore, most equity fundraisers look for capital from these accredited investors. Many experts believe that angel investors must be accredited.

In fact, historically, angel investing opportunities were only available to accredited investors. Title III and Title IV of the JOBS Act changed that somewhat, giving access to investors under Regulation A+ and Regulation CF+. Investors who don't meet the criteria to be accredited can now invest under A+ and CF+, giving angel investors new opportunities and definitions in capital markets.

This type of investor looks for companies in the early stages of growth, which means the risk level is high. Because many companies won't survive, angel investors must diversify. Typically, these investors put $25,000 to $50,000 into each company. In less common cases, the range can go as low as $10,000 and high as $100,000.

For a full portfolio of as many as 20 companies, an angel investor must be comfortable with investing from $200,000 to $500,000. This is not the type of investing you do with your entire nest egg. Most angels aim to put 10 to 20 percent of their investable assets into these projects. Mr Rose, the founder of New York Angels, states, “If you take a look at the numbers, I think you'll find the average angel investor has somewhere north of $5 million and south of $100 million in assets.”

Legal and Financial Qualifications

To meet angel investor requirements, most investors must qualify as accredited investors. This status is defined by the SEC and typically includes:

  • An annual income of at least $200,000 (or $300,000 with a spouse) for the last two years, with an expectation of similar income in the current year, or
  • A net worth exceeding $1 million, excluding the value of one’s primary residence.

However, under the SEC’s newer regulations such as Regulation Crowdfunding (Reg CF) and Regulation A+, even non-accredited investors may invest in startups within certain limits based on their income or net worth. These options open angel investing to a broader demographic while maintaining investor protections.

Understanding the Risks

The inaccessibility of the money, once it's placed into an angel project, is disturbing to many investors. Most are used to more liquid tools like stocks or other kinds of property. Angel investors must also be prepared for projects to fail as often as they succeed. “In the case of angels, if half your companies die, that's par for the course,” Rose says. “For many people, failure is not an option, and they can't psychologically deal with it.”

While the risks are high, so are the potential rewards. Statistically, one in every 10 or 20 investments explodes and brings in an impressive return, hopefully making up for any failures.

How to Evaluate a Startup Investment

When considering a startup, angel investors typically evaluate:

  • Founding Team: Passion, experience, and credibility of the startup's leadership.
  • Market Size and Potential: A large addressable market is key for scalability.
  • Business Model: Clear path to revenue, growth, and sustainability.
  • Traction: Early users, revenue, or partnerships suggest product-market fit.
  • Exit Potential: Angels look for opportunities with a plausible exit strategy (e.g., acquisition or IPO).

Performing due diligence is essential to reduce risks, including reviewing the startup’s cap table, legal structure, financials, and competitive landscape. 

Having Relevant Experience

Most angel investors have entrepreneurial backgrounds. Thus, they know how to grow an investment portfolio because they have experience with the startup phase of a company. “You'll see a lot of entrepreneurs in a particular area — whether it's life sciences or technology or consumer products — come back and invest in that space because they have a background they can bring to making a smart decision,” says Rose.

Why Industry Knowledge Matters

Industry expertise is a valuable asset for angel investors. Not only does it help evaluate deals more effectively, but it also enhances the value the investor can bring to startups. Angels often serve as informal advisors, offering mentorship, introductions, and insight.This is why many seasoned angels focus their investments in sectors they’ve worked in—like fintech, biotech, or SaaS—where they can more accurately assess innovation, execution feasibility, and market readiness.

Learning From the Community

Rose says that angel groups give aspiring investors an excellent place to learn. “Most angel groups do not commit you to write a check the very first day,” he says. “You have time to actually observe and see what happens, and see what companies present. … If you're in an angel group, [it] has deal-flow, so you can see the companies coming in, and the group has a process for screening. They get five to 100 deals a month coming in, and they ultimately present two or three or four to the whole group.”

Those new to the field can watch how others operate and make decisions. This helps the learner understand the field in more detail and develop his or her own style. Working on a few projects in partnership with a more experienced investor helps build confidence.

“Now that you have investments in a few companies,” says Rose, “maybe you become friendly with those CEOs, you start going to conferences, you get invited to demo days from accelerators because you're a proven investor, and you get to see more and more companies. This is one of those things where you can never have enough practice, so the more companies you see, the more deals you do, the more you learn. I'm still learning and I've done 90+ companies at this point.”

Using Angel Networks and Syndicates

New and seasoned investors often join angel networks or syndicates to benefit from collective expertise and gain access to vetted deals. These groups typically offer:

  • Shared due diligence and deal evaluation
  • Lower minimum investment amounts when pooling funds
  • Access to exclusive startup presentations and demo days

Platforms like AngelList and regional angel associations (e.g., Tech Coast Angels, Golden Seeds) facilitate syndicate participation, allowing investors to spread risk across multiple startups while learning from experienced peers. 

Frequently Asked Questions

1. Do I need to be accredited to be an angel investor?

Not always. While many angel opportunities require accreditation, newer regulations like Reg CF and Reg A+ permit limited investment from non-accredited individuals.

2. How much money do angel investors usually invest?

Typical individual investments range from $10,000 to $100,000 per startup, with portfolios often totaling $200,000 to $500,000 across multiple deals.

3. What are the main risks of angel investing?

Angel investments are highly illiquid and risky. Many startups fail, so diversification and patience are essential.

4. Can I join an angel group as a beginner?

Yes. Many angel groups welcome new members and provide a learning environment through shared deal reviews, mentorship, and structured processes.

5. What qualifications are most important for angel investors?

Besides financial eligibility, successful angel investors usually have industry expertise, risk tolerance, long-term capital, and a strong learning mindset.

If you need help determining whether you meet the angel investor requirements, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including working with or on behalf of companies like Google, Menlo Ventures, and Airbnb.