Why We Need the One Percent

I am not a member of the One Percent.

Some wag once said “Why would I want to be a member of a club that would have me as a member?”

Well, perhaps like you, I wish I was a member of the One Percent of richest Americans.  You see, I like the One Percent.  I like the One Percent of Americans with the highest incomes because we – all of us – need them.

Members of the One Percent club of our leading wealthiest citizens are also America’s leading investors.  Most importantly, they are the only people who can act as angel investors.

An angel investor (or just “angel”) is an affluent individual who provides capital for a business startup, usually in exchange for ownership equity. Typically cashed-out entrepreneurs or retired corporate executives, angels invest because they want to.  They invest because they like the new business idea, or they take a shine to the individual entrepreneur.

Angels are limited to the One Percenters because they must be prepared to lose all of their investment.  With a smile.  That’s not just me saying so – that is the law.  To be an accredited investor under the U.S. Securities laws, an investor must be “sophisticated.”  In layman’s language, these investors must be smart, and rich.

Angels also do more than just provide funding.

Angels get involved.  Unlike venture capitalists, bankers, and corporate lenders, angel investors take an active interest in the new business.  They often work to support their investments by finding new customers, helping plan for growth, or just looking over the shoulder of the founders with a watchful eye.

A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital.  Angels are the wind beneath the wings of America’s entrepreneurs.

According to the SBA’s Center for Venture Research, U.S. angel investors placed $20.1 billion into startups in 2010 (the most recent year for available statistics).  More than 61,000 companies received angel investments that year.  258,000 individual angels made active investments.

That’s a small club in the overall scheme of things.  (The University of Michigan alone has more than 500,000 living alumni.)  But the One Percent is a small club with a big impact.

Here’s hoping with the election behind us the One Percent gets a little – make that a lot – more understanding and respect for the important role they can play in the future of the Nation.