Book Review

The Angel Investor’s Handbook: How to Profit from Early-Stage Investing

By Gerald A. Benjamin, Joel Margulis

Picking a winner is part of being a successful angel investor. But the real secret to success is knowing how to spot a loser. Authors Gerald B. Benjamin and Joel Margulis guide readers through the minefield of angel investing to help readers make smart investments in this high-stakes arena.

The prolific authors touch on critical phases of angel investing:

?     How to find the most promising opportunities in an inefficient, fragmented market,

?     How to sidestep potentially disastrous mistakes by doing thorough due diligence,

?     How to manage the investing process for high portfolio returns while reducing the downside risk.

The Angel Investor’s Handbook is an authorative work including detailed documents and term sheets from actual transactions. The work stresses the significance of the angel investor contribution to today’s economy for investors looking beyond the stock market to spot exciting new opportunities in private equity.

The authors argue that new companies backed by angel investing are the cornerstone of the economic process. Benjamin and Margulis say angels created 20 million new jobs – 67 percent of the total between 1979 and 1993, and 12 million more by 1997.

The Angel Investor’s Handbook points out that small companies represent 47 percent of all sales, 51 percent of the private gross domestic product, 52 percent of business net worth and 99 percent of all companies in the U.S. The book traces how start-up businesses create 27 percent of new jobs. Private investors finance many of these fast-growing firms up to at least 30 percent above contributions from family and friends, especially during the critical first three years of development.

According to the Bureau of Labor Statistics, small firms are expected to contribute about 60 percent of new jobs created between 1994 and 2005. In addition, 55 percent of all technological innovations grow from small companies.

Benjamin and Margulis offer sound advice to entrepreneurs by showing how angel investors focus on new and fast-growing companies because of their potential capital appreciation. Typically, investor transactions with these companies involve equity securities. What’s more, these investors add value beyond the money they invest by helping to develop products and services through their extensive business experience.

Both authors have an extensive background in investing and writing. Benjamin is the senior managing partner and founder of International Capital Resources in San Francisco, the largest nationwide angel investor network. He has coauthored several books, including two on angel investing, and has worked as an entrepreneurial adviser for more than 25 years.

Margulis is the author of a number of books and has coauthored two books on angel financing for the entrepreneur. He also teaches writing at San Francisco State University.

By Frank Szivos

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