Angel investors play a crucial role in helping new startups get off the ground by providing early stage funding. However, traditional angel investing has typically required significant funds, such as €25.000 or more.
In recent years, a new breed of angel investor has emerged called a 'micro-angel investor'. Micro-angel investors are filling an important niche by providing smaller amounts of startup capital, usually between €1.000 to €10.000.
This new category of angel investor is allowing more entrepreneurs to gain access to seed funding and helping fuel the ongoing startup revolution. In this article, I'll explain exactly what a micro-angel investor is and why their role is becoming increasingly important.

Defining Micro-Angel InvestingA micro-angel investor is essentially an individual who invests their personal funds directly into early stage startups, just like a traditional angel investor. However, the distinguishing factor is the amount invested tends to be considerably smaller, usually under €10.000 per deal.

Some key characteristics of micro-angel investing include:

• Investments range from €1.000 to €10.000 per startup.
• Investors typically make multiple small investments across different startups.
• Due diligence is still conducted but can be less formal given the smaller amounts.
• Investors may seek smaller ownership stakes than traditional angels.
• Exit timelines tend to be longer since investments are earlier stage.

Democratizing Access to Startup FundingOne of the major benefits of micro-angel investing is how it is helping to democratize access to seed funding for entrepreneurs. Previously, the barriers to entry for fundraising were much higher since angels expected larger minimum investments.
Micro-angel investing lowers this barrier by allowing founders to raise money in smaller increments from many individual investors. This gives more startups a fighting chance to get off the ground and move projects from concept to reality.
As Paul Graham of YCombinator notes, "access to small amounts of seed funding is what really catalyzes the formation of startups." By filling the gap under €10k, micro-angels are directly fueling more startup formation and driving broader economic growth (Graham, 2009).

Lower Risk Through DiversificationAnother advantage of micro-angel investing is the built-in diversification it provides through many small bets. For the investors, putting €5.000 into 5 different projects carries less risk than committing €25.000 to a single startup.
If some investments fail as expected, other successful ones can offset those losses. This matches well with the high-risk nature of early stage investing. Proper diversification through micro-deals improves the risk-adjusted returns over time (Howard and Mihov, 2012).

Networking and Learning OpportunitiesWhile financial returns are important, micro-angel investing also provides less tangible benefits. Interacting with passionate founders early on is fascinating and a great way to learn about emerging technologies and industries.
It expands an investors network and opens doors to future deal flow and career opportunities. This "smart money" can also potentially guide portfolio companies with advice, introductions and mentoring where needed (Mitteness, et. al., 2012).
For individuals passionate about startups but without large sums to commit, micro-angel investing delivers an impactful way to contribute while developing new skills.

ConclusionAs startup innovation spreads to every sector, access to early funding becomes ever more critical. Micro-angel investors are playing a growing role by lowering the barriers for entrepreneurs and fueling the formation of new companies.
Their lower ticket sizes improve risk-adjusted returns through diversification. And they offer valuable "smart money" beyond just capital. As one of the newest sectors of angel investing to emerge, micro-angels are sure to have an ongoing outsized impact on driving innovation.