No Angels In The Outfield: Why Angel Investors Invest Locally

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No Angels In The Outfield: Why Angel Investors Invest Locally


One of the common questions I get from entrepreneurs located outside the U.S. is how to attract angel investments from U.S. investors for their startups.  Unfortunately, the answer is that it’s a very hard thing to do.  It isn’t that startups can only succeed in the U.S.  That’s clearly not the case (as countless examples around the world have demonstrated).  The primary reason is that angel investors generally tend to be very “local” in their investments.  This is similar to the behavior of VCs who also generally stay within their local regions for investment opportunities.
Note:  The term “outfield” is a baseball term referring to an area that extends beyond the “infield”.  
Note 2:  Despite living within walking distance of one of the most widely known baseball stadiums in the world (Fenway Park), I’ve never actually watched a baseball game and don’t follow the sport.  In a weird twist of fate, I’m scheduled to go see my first game tomorrow with about a hundred of my MIT classmates.
In any case, on with the article…
Why Angel Investors Tend To Invest Locally
So, here are my guesses as to why most angel investors tend to invest locally.  Though these are my own thoughts and opinions, as an angel myself, my guess is that other angel investors have similar patterns of behavior.  I’ve talked to quite a few of them, and I think the views below are pretty common.
  1. Angels Want To Re-live The Startup Adventure:  Many angel investors were (or are) entrepreneurs themselves.  What motivates them to invest in startups is that they get a chance to re-live at some level all the fun and excitement of their early entrepreneurial adventures (without all that hard work).  This type of vicarious living is hard to do if the company the angel invests in is thousands of miles away.  

  1. Angels Invest Via Referral:  Many of the investments that angels make are in companies that were referred to them by people they know or are within circles they already travel in.  In my case, of the startups I’m involved in, two of the investments I’ve made are in companies started by classmates of mine at MIT and one is from an entrepreneur working with an open source project that is of interest to me.  In all of these cases, I invested in people I knew or were referred to me.  I did not go looking for these investment opportunities myself.  So, unless an angel is getting referrals from outside their local area, chances are, she is not going to invest internationally.

  1. Angels Like To Support “Local” Entrepreneurs:  One of the side benefits of being an angel investor is that it builds credibility and good will within the local community.  In my case, my investments in a couple of Boston-based startups have put me in touch with a network of some great people that I would likely not have gotten to know otherwise.  Since I’m working on a startup of my own ( , this can often be useful.

  1. Angels Are Not Chasing Investment Returns:  Though every angel you talk to will likely tell you that they’re looking for financial returns on their investments, the truth is that this is not usually their primary motive.  Entrepreneurs raising capital often have this misguided notion that if only they could convince a potential angel investor that they are the next Skype, that the angel will write them a check.  The reality is a little more subtle.  Angels usually don’t go seeking out investments thinking they’re going to find the next Skype (or Google or whatever).  They’ve been around the block (as us Americans like to say) and are much more realistic than that.  Instead, they allow opportunities to come to them and then evaluate them based on a combination of factors (the founding team, the idea, the potential return, etc.)  Stated differently, they have no way of knowing whether your startup is the next big thing – or that startup down the street is the next big thing.  So, all things being equal, they’re going to favor the local startup for the reasons stated above.

Of course, this presents a challenge for aspiring entrepreneurs that are not located somewhere where there is active angel investment going on.  This is one of the disappointing realities of life.  There’s a unique set of ingredients that are necessary to create a healthy entrepreneurial ecosystem (something I’ve spent some time studying and debating at MIT).  Angels are one of these critical ingredients, but they tend to be generated from successful entrepreneurs.  This leads to a chicken and egg problem.  Angels are usually formed by previously successful entrepreneurs.  But, entrepreneurs are created when there is available capital for to pursue their ideas.  I don’t have a solution to this problem.  But, I will say this:  My advice even to local entrepreneurs that have access to angel capital is to instead focus on bootstrapping (i.e. growing the company with minimal capital).  Software startups are much cheaper to experiment with these days than they ever were and there’s no evidence that you need angel money anyways.  

Posted by Dharmesh Shah on Wed, May 03, 2006


Is anybody else getting annoyed by the constant 'casual' mentioning that the author is a student at MIT? Three times in this post alone.. Get over it man. (And before anyone accuses me of being envious, I turned down MIT for graduate school to attend my current school..)

posted on Wednesday, May 03, 2006 at 10:24 PM by Javier


My apologies. Hadn't realized that the number of casual references school had reached annoying levels yet.

In my defense, I'm in my last term and spending too many hours a day thinking about school stuff (hence the references).

Will make a conscious effort to tone down the casual references (unless for some reason, the reference is relevant).

posted on Wednesday, May 03, 2006 at 10:34 PM by

Oh, and you definitely don't want to read the first blog on my new startup site ( It's got about a 100 non-casual references to <myschool> and sounds like I won the oscars or something. :)

posted on Wednesday, May 03, 2006 at 10:36 PM by


No worries. And my apologies for coming off so snarky. MIT is an incredible school and you have every right to be proud to go there, it's just the references were all a bit gratuituous. 'I've been studying this for my thesis' seems a lot better--to me--than 'I've been studying this at MIT' since then you're standing more on your own and not leaning so heavily on the reputation of MIT.
Also, I really enjoy your blog. I've only been reading it for a short time, but everything is very well written with a lot of useful original content. Keep up the good work and good luck with your studies.

posted on Thursday, May 04, 2006 at 5:53 AM by Javier

Good post, it really helped me understand how Angel investment works in general.
I have another question. Suppose i am in US and have a software product idea and a prototype ready and i want to launch my product in European Market i.e. i don't want to launch my product in US even being in US. Would Angels invest then?
I guess similar case will suggest whether Angels are ready to invest in if i am in South Asia and i want to launch my product in US being in South Asia.
So all in all; would you, being in US, invest in any promising US-based startup that want to launch only in European market ? If it depends , would you please outline the factors?
Thanks in advance for your time and insights. Looking forward.

posted on Thursday, May 04, 2006 at 7:11 AM by

I don't think angels care as much as to where your customers are (more about where you are).

The only caveat would be that if you are expecting the investors to help you with early customer needs, if they dont' have contacts in your target market, that could be a minor issue -- but likely not enough to not consider you for an investment.

posted on Friday, May 05, 2006 at 12:16 PM by

I am the managing director of Patriot Venture Capital Group, LLC, a venture capital/private equity firm focusing on angel and early stage investing through various Philadelphia area angel networks. We would like to align with Boston/Cambridge based angel networks within MIT, Harvard and BU and would appreciate any suggestions.

posted on Thursday, January 17, 2008 at 2:31 PM by Henry Ian Pass, Esq.

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