Frequently Asked Questions

What is an angel investor?
An angel investor is an individual private investor who invests in entrepreneurial companies at the seed or start-up phase. Typically, angels either take a direct equity position in a company through the issuance of shares or indirectly through other instruments that are convertible into shares.

How significant is angel investing as opposed to other investment activities?
Angel investment is a very significant form of venture investing in the United States, with total investment dollars in recent years well in excess $15 billion a year. In early 2010, there were over 260 angel groups like Cherrystone in the United States, funding literally thousands of start-ups.

Who are angel investors?
Angel investors have been described as “excited” successful entrepreneurs and business people who invest significant time in portfolio companies as mentors, advisors, and members of Boards of Directors. Angels often invest individually but more recently have begun to approach their investing with other like-minded individuals through organizations like Cherrystone. SEC rules require all angels to satisfy the Accredited Investor Status outlined in the attached Member Certificate of Accredited Investor Status.

How is Cherrystone organized?
Cherrystone Angel Group is an invitation only investor group that works together to screen deals, share due diligence, and negotiate common terms for an investment. Cherrystone is a limited liability company. Members pay a $1,600 annual capital contribution to fund the group’s administrative activities.

Do I make my own investment decisions?
Cherrystone members make their own investment decisions based on their interest in a company and their capacity to invest. It is expected that Cherrystone will fund 2-3 deals each year and that the group’s collective investment in any deal will be in the $250- 500,000 range.
Following a prospective investment opportunity’s presentation to Cherrystone’s general membership, the group decides whether there is sufficient interest to proceed to more in depth due diligence. If so, a committee of volunteers performs the due diligence, reports their findings back to the group, and then solicits individual investment commitments. If the minimum investment threshold is reached, the same committee negotiates deal terms for the entire group. Cherrystone retains legal counsel to advise on deal issues and to prepare documentation. Cherrystone typically takes one Board seat on behalf of the group in the funded company.

How much do I have to invest?
Individual investments in a single company typically range from $10-50,000, and most members opt to diversify their risk by participating in a larger number of investments at a lower individual amount. Based on interest and deal flow, each member on average is likely to contribute at least $20-25,000 a year to group investments. As opportunities arise, there is also the ability to contribute significantly more than this amount, if a member’s interest and capacity is sufficient.

How much time do I need to invest in Cherrystone?
As a member driven group, Cherrystone members are active and involved. Their three main priorities are to do good deals, get good returns and have fun in the process! The membership meets once a month to review deals, update current investments and occasionally hear presentations on items of interest to the angel investment community. There are also a number of active committees which screen deals, attend to membership issues and oversee due diligence. It is expected that members will try to attend most general membership meetings and will also participate in due diligence activities when their experience is relevant to a prospective investment.

How long does it take to get a return on an investment I make?
The timing of a return on an angel investment, like any form of venture capital, is difficult to predict. Early stage venture capitalists these days expect an exit in about 4 - 7 years, although that could vary significantly depending on the deal and the market. Because angel investing occurs so early in a company’s life cycle, it is often considered the riskiest, but potentially most rewarding, of the venture investment activities.

Where can I learn more about angel investing?
For more information about angel investing, please visit the Angel Capital Association’s web-site at www.angelcapitalassociation.org or contact us.