Ever wonder how we early stage investors became known as angels? I’ll tell you the story.

Back in the mid-1970s, at the University of New Hampshire, Bill (Prof. William) Wetzel was researching how new companies raised startup funds.  His studies uncovered a new class of investor:  high net worth self-made individuals who were willing to take greater risks or accept lesser returns than others. More importantly, these investors provided more than money; they provided the benefit of their experience, which was often of more value than the amount of money they could invest.  A typical investor would develop a portfolio of four or five companies, typically located within a day’s drive of his home.

But what to call these patrons?  It occurred to Wetzel that these investors had much in common with the legendary angels of Broadway, who supported young artists out of a sincere interest in promoting the careers of talented people.

Thus Wetzel began to call his business investors “angels.”  “We didn’t originate the term, we stole it from Broadway,” he says.  Then along came Inc. Magazine, where the term first appeared in print in an article, “The Truth about Angels, More Than a Myth.”  Thus did we become angels, are angels, and most likely will be called angels in the future, as the term becomes even more institutionalized  in the names of many angel groups and in internationally recognized  trade groups, such as our Angel Capital Association.

Epilog: How art thou fallen from heaven, O Lucifer, son of the morning! Isaiah 14:12

Most Broadway angels have faded from memory, but here in the Northeast the fame, or rather notoriety, of one particular angel may serve us as a cautionary tale.

Harry Frazee, a well-known Broadway angel, added the Boston Red Sox to his portfolio in 1916. The team, which won the World Series in 1918, was stocked with great players, including a young pitcher/hitter named Babe Ruth.

But by 1920 Frazee’s finances were depleted, so he sold Babe Ruth to the New York Yankees for $125,000 in cash and a $300,000 mortgage on Fenway Park.  No trade, just cash. In rapid order, Frazee, who had purchased the Red Sox for $500,000, sold and traded additional players for at least $155,000. In 1923 he sold the team, now the worst team in baseball.

With money from the Ruth sale, Frazee backed several Broadway plays, one of which, when rewritten as a musical comedy, became “No No Nanette,” the biggest hit of the era. Once again Frazee was rich, but in the minds of my parents and grandparents generation, he became the most despised man in Boston history.

So what Had Frazee become? He had bought a great team, sold off the assets, destroyed the hopes of millions of fans young and old, while enriching  only himself. Had he passed in rapid succession through angel investing into venture capital and straight on to private equity? They say that just because a vegetarian starts eating meat doesn’t mean he has to go all the way to cannibalism.   All we know for certain is that from 1920 onwards, Harry Frazee was most assuredly   Ruth-Less.

The Red Sox didn’t win another World Series for 86 years, a drought often called “The Curse of the Bambino.”