What Is an Angel Investor?

For an entrepreneur, an angel investor is exactly as the name suggests-- the godsend of a high net worth individual willing to put cash into a nascent business idea or company in exchange for equity.

Angel Investors and Small Business Angel investors are critical to the early genesis of future corporations, often willing to invest at the earliest of development stages, ahead of any venture capital fund. In 2008 for example, U.S. angel investors were involved in 55,000 deals worth a total of $19 billion. Out of this number, which works out to an average of 150 transactions for every day of the year, including weekends (when angel investors are often at their busiest), 35,000 deals involved small businesses.

Wooing Angel Investors: Do's and Don'ts

Simona Covel interviewed angel investor Knox Massey in today’s StartupJournal | Venture Capital column and produces a good practical list of what to do and what not to do when seeking angel investors.

- Research the investors
- Don’t expect to get funding right away
- Network
- Treat your initial interactions as the first step in a long-term relationship
- Don’t forget about your long-term plan
- Look at your investors as potential mentors.

This is well done and practical. If you are contemplating angel investment, you should read this.

What is Angel Investor (2)

An angel investor or angel (also known as a business angel or informal investor) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.

A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital.

Investment profile
Angel investments bear extremely high risk and are usually subject to dilution from future investment rounds. As such, they require a very high return on investment. Because a large percentage of angel investments are lost completely when early stage companies fail, professional angel investors seek investments that have the potential to return at least 10 or more times their original investment within 5 years, through a defined exit strategy, such as plans for an initial public offering or an acquisition.

What is Angel Investor (1)

An angel investor or angel (also known as a business angel or informal investor) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.

A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital.

Source and extent of funding

Angels typically invest their own funds, unlike venture capitalists, who manage the pooled money of others in a professionally-managed fund. Although typically reflecting the investment judgment of an individual, the actual entity that provides the funding may be a trust, business, limited liability company, investment fund, etc. The Harvard report by William R. Kerr, Josh Lerner, and Antoinette Schoar tables evidence that angel-funded startup companies are less likely to fail than companies that rely on other forms of initial financing.