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Angel Matching Services

These services began with great promise during the Internet Boom times of 1997-1999. Their business concept was simple: let entrepreneurs submit summaries on their companies, which would be posted online and available on a password-protected basis to wealthy individuals interested in making investments. Article continues below.

If a deal were consummated through the service, sometimes the network would receive a fee. In other cases, the matching services just charged a small fee to the entrepreneurs and angels to have access to the web site.

It turned out that not as much deal making activity actually took place with the services as they originally envisioned, and by 2005, most of them had disappeared. The problems were two-fold: Angel investing is a hands-on activity; the angel needs to meet the entrepreneurs in person and evaluate their competence before ever considering an investment. They do not make decisions solely based on what they read about a company. Secondly, there were concerns that the services were not secure, that proprietary information about the companies could be seen by persons who were not really angel investors as defined by the SEC. Thus, the services were in effect advertising unregulated investments to the general public, and they quickly came under scrutiny by the SEC.

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