International angel investing. Can it work?

Angel investing is a rising phenomenon around the world. In the US it is a major source of capital for start-ups, and in emerging markets the deal flow has started to grow from a negligible base. Each country, or even each major city, appears to be the locus of at least one angel group. However, the concept of cross border angel investing has not yet taken off, because investors typically want to be near the companies that they invest in. However, there are several reasons why international angel investing might work:

1. Start-ups are often global on day one because of the availability of the Internet. A company that starts off in the US may find that most of its customers are coming from India. The original angel investors, therefore, are effectively investing in an international company.

2. Angels are not just investors, they’re also people who may have idiosyncratic reasons for investing abroad. For example, they may have a fondness for a particular foreign country, and investing in that country would give them a reason to travel there. After all, it’s their money, so they don’t need to justify their investment purely on the basis of ROI.

3. Angels who have already invested in a successful company in their home country may want to invest in a similar company abroad, since one might be an acquisition candidate for the other, thus increasing the probability of an early exit.