Angels like to "kick tires." Angel investors are usually living within fifty miles of your office. Because of this policy. Angel investors want to reach out and touch their risk capital investments. They'll want fifty percent equity in your business for their money. It's a losing formula for angels because more than half of their investments fail. However, touching someone doesn't protect investor from loss. Assuming an honest entrepreneur, a simple program to limit investment risk works better.

Sophisticated Investors want to quickly recover their risk capital. Profits and ownership are secondary to risk management. I've taught this risk management principle to my my clients for over for twenty years. For our money, we want a free ride on any company’s future success. We want our risk capital returned within weeks of our investment. We'll wait years to take our profit.

I'm creating Global Village Investment Club on same principle. We'll invest in operating non-U.S. companies with a national market for their product or service. Management should be seeking money to expand their markets by asset acquisition or globalization. The business plan must be clear and specific. The upside potential in 5-7 years must be at least tenfold Club members investment.

In last issue of EFS (V3#10), my Venture Capital article reflected current experiences of three small Silicon Valley companies. My article generated comments from four Venture Capitalists. In essence, there are Venture Capitalists and there are Vulture Capitalists.

Venture Capitalists fund one company in every 2,500 companies that query them. Their preferred exit strategy is private sale of company. They are willing to hold their equity in an investment for years. They believe that they bring management and financial skills to company that will enhance company's probability of success. If two-of-seven investments (29%) succeed, they make money.

Vulture Capitalists fund one company in every 100 companies that query them. Their preferred exit strategy is to take company public. They intend to recover their risk capital quickly. They bring sales skills to company. Their goal is to make money on every investment.

I've come across Vulture Capitalists offering toxic convertibles. They act as Merchant Bankers offering bridge financing. They offer secondary Private Placement financing to high flying, usually Hi-Tech public companies.