Fool’s Gold: The Truth Behind Angel Investing in America

Fool's Gold: Truth about Angel Investing by Scott ShaneIf you’ve ever thought about seeking angel investment capital for your business, there’s a good chance you will start the process with some misconceptions. Same goes if you are thinking of becoming an angel to invest in other businesses.

For instance, you may have had the notion that individual angels are rich — or at least very well off — and invest a lot of money in each business. Not necessarily so, says the new book “Fool’s Gold: The Truth Behind Angel Investing in America.”

I recommend you spend some quality time with this book if you are interested in seeking angel funding. It could save you some mis-starts and get you pointed in the right direction faster.

What You Will Get From This Book

Fool’s Gold is by Scott Shane, one of our Small Business Trends Experts who publishes something new here nearly every Monday morning. Those of you who are regular readers recognize Scott as someone always ready with the facts. Often those facts are contrary to popular belief or common wisdom. Very often he floats a provocative idea that challenges you to think.

And so it is with his new book.

This is a book stuffed full of facts and study data. If you wanted to know, say, whether your retail business is a good candidate for angel investing, the book will tell you (answer: yes, 25% of angel investments are made in retail businesses).

You might wonder how a book of facts and data could help you as an entrepreneur. That’s easy. From information gleaned you can get a much better idea of such things as:

  • why angels invest (it may be as much about having a hobby as making money)
  • how angels decide on which businesses to invest in (with less investigation than you’d expect)
  • how angel investors come up with valuations and what kind of ownership interest they will expect (most don’t do formal valuations and they demand smaller ownership stakes than you might expect)
  • where and how to find angel investors (hint: look locally)

All of these things will help you understand how to appeal to angel investors. I put together the following chart with a handful of the many misconceptions and the corresponding real facts, so you can see the kind of information the book can give you (this is a small sampling):

What I Liked About This Book

I loved the writing style. It’s crisp and direct. Scott gets right to the point. And despite the many figures and statistics scattered throughout, it’s relatively easy to read and comprehend.

Plus, the information is practical and “real world” — no ivory towers approach.

One of the best features — one that more books should have — is a summary at the end of every chapter, called “Key Facts to Remember.” It’s just that — Scott summarizes the key take-away facts about angel investing.

One Thing to Know About This Book

The book is published by Oxford University Press and as you might guess from that, is a scholarly book. It is scrupulously researched with sources noted. The last 40 pages of the book are bibliography pointing to the angel investing studies and information sources cited throughout the book.

My only thought is that it would help to have the research sources in a list somewhere online. Reason? Many of the sources cited are Web resources with long URLs. They are difficult to key in manually.

However, for most people this won’t matter as most won’t look up the sources. Most of us will get all that we need to know just by reading the book.

Who Should Read This Book

You should get this book if you are serious about getting angel investment or if you are thinking of becoming an angel investor yourself. As the book points out, there’s a lot of confusing and misleading information about angel investing on the Web. If you listen to some of the information available, you could easily conclude that you have no shot at getting angel investment and possibly overlook a good source of funding.

You can get Fool’s Gold on


Anita Campbell Anita Campbell is the Founder, CEO and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses.

7 Reactions
  1. A lot of the facts in the chart have surprised me. It just goes to show that there are lots of things people are not aware of about angel investors. There’s bound to be lots to learn from reading this book. Sounds like a valuable source of info.

  2. All of Scott’s writings about Angel investing have really opened my eyes to the topic. And the stats surrounding it are always surprising to me. Especially the stats regarding controlling shares. I never would’ve imagined that you didn’t have to relinquish more than the average listed there. As a matter of fact, that isn’t even close to what I would’ve thought it to actually be. Congrat’s on the new book, Scott!

  3. I found you through Twitter. May I use this chart? I have a presentation coming up and think my audience would enjoy this.

  4. I have to agree on your statement Anita about Scott as someone always ready with the facts. He really is and is really good to read articles especially with claims who have supporting facts about it.

  5. It is interesting I have actually used Angel investing for my company and found that almost every single on of these points was true with the angel investor that i’m working with. It’s not as hard as people make it out to be. Remember that it is easier to find money that it is to find a good idea, product or company.

  6. There are really a lot to learn here. I love the data presented in the chart.

  7. Anita: Maybe Oxford Press could create a special research source site similar as Yale University Press’s quiz site for Scott Shane’s book, The Illusions of Entrepreneurship.