What is an Angel Investor?

An Angel Investor (also referred to as a Business Angel or simply an Angel) is an investor, usually a high net-worth individual investing their own money, which provides financial backing for start-ups and early stage ventures.

In addition to providing capital, an Angel Investor will typically contribute to the value of the business by providing advice and sharing their experience and network of contacts.  An increasing number of Angel Investors organize themselves into Angel Groups or Angel Networks in order to share research and pool their investment capital, expertise and networks.

What is an Angel Investor typically investing in?

Unlike investors in later stage ventures, Angel Investors are usually basing their investment decision more on the founders, their vision and their drive to succeed rather than the viability of the business, as it presently exists, although the existence of proprietary intellectual property or similar sustainable advantage may be a requisite. Moreover, unlike institutional investors, such as venture capitalists and bankers, many Angels are not motivated solely by profit; they may be just as motivated by the satisfaction of helping a young business succeed or making a social contribution by catalyzing economic growth as they are by the money they stand to gain.

What is an Angel Investor usual deal terms?

Angel Investors and their deal terms vary widely, but they are typically willing to accept risk and demand little or no control in return for the chance to own a piece of a business that may be valuable someday based on their belief in the founders.  Although an Angel Investors will typically invest in both equity and convertible debt securities, they are invariably seeking equity like returns commensurate with the risk that they are taking, often as high as 10x their invested capital given the propensity for early stage businesses to fail.