Question: We are in the process of raising angel money ($500,000) to be followed by 1 or 2 rounds of institutional money. We’ve heard many times that the less number of angels that you have the better it will be when it’s time to sort the details of the following rounds. We are not sure what would be considered an acceptable minimum investment per investor. At first we thought that $50,000 could be an acceptable minimum but we were advised to lower it to $25,000 considering the area where we are located. Is it ok to accept a smaller amount as long as we request power of attorneys from the angels to mitigate any risk for the following rounds?

(Jason)  You are thinking about all the right issues.  To reiterate your point, the potential negative of having too many investors is trying to “herd the cats” when you later take on institutional money.  Normally $25,000 is a good minimum, but it’s not unheard of to see $10,000 or $15,000 chunks as well.  If you are able to get a proxy on their shares to vote, then having more investors than less becomes much less an issue.  In short, if you can truly control the shareholder group, it’s not a major issue to have a few more angel investors. 

Whatever you do, make sure that your investors are qualified investors and that you aren’t running afoul of any federal or state securities laws.  If you sell private company securities to non-qualified buyers (read:  not high enough net worth), then you will have real issues closing on an institutional round later because of potential rescission rights issues.