An angel investor is an individual who provides financial backing to start-up companies or entrepreneurs. These investors are typically high net worth individuals who have a passion for supporting and mentoring new businesses.
The term "angel" comes from the idea that these investors are providing a much-needed financial boost to help a business take flight, much like a guardian angel. In exchange for their investment, angel investors typically receive ownership equity in the company. This allows them to share in the profits and potential success of the business.
Angel investors are often active in the local business community and may have a particular interest in supporting businesses in a specific industry or location. They may also offer their expertise and connections to the business as a way to help it succeed.
Angel investors differ from venture capitalists in that they typically invest their own money rather than managing funds on behalf of a group of investors. They also tend to invest smaller amounts of money at an earlier stage in a company's development, whereas venture capitalists typically invest larger sums of money in more established businesses.
While angel investing can be risky, as start-up companies have a high failure rate, it can also be rewarding for both the investor and the business. For the business, angel investment can provide the necessary capital and resources to get off the ground, and for the investor, it can be a way to support a new and innovative idea while also potentially earning a return on their investment.
Overall, angel investors play a crucial role in supporting the growth and development of start-up companies and entrepreneurs. They provide not only financial support but also mentorship and guidance to help these businesses succeed.