Angel Investor

What Is An Angel Investor?

An Angel investor is a high-net-worth person who provides financial backing to potential startups in exchange for a share of the company, generally in the form of equity or royalties. Angel investors are frequently discovered among a startup’s friends and family and less often from an outsider.

Deeper Definition

Angel investors must technically be certified investors, but you’ll regularly see business owners’, investing relatives, and friends referred to as angel investors—even if they don’t fulfill the capital criteria.

However, not all angel investors operate alone. Investor groups, often known as angel networks, are individuals who combine their assets to invest in businesses.

Angel investors provide better conditions than conventional lenders because they are more concerned with the startup’s ability to start a firm than with the enterprise’s sustainability. Angel investors are more interested in assisting businesses in their early stages than in making a profit from the company. They are the polar opposite of venture capitalists.

You obtain the investor’s experience in addition to the monetary rewards of angel investment. Angel investors frequently run their thriving firms, indicating that they may have picked up essential business tips that they may use for your firm. When angel investors decide to invest in your business, they become an extension of your team, and you may pick their brains and benefit from their experience to improve your odds of succeeding.

Angel investors are looking forward to what is known as an equity event. In many situations, the startup is sold, and the angel’s stock entitles them to a portion of the proceeds. An IPO, or initial public offering, is another option for a startup. In that instance, the corporation begins selling stock on the stock exchange. The angel may be compensated as part of the IPO. Otherwise, the IPO provides an opportunity for angel investors to sell their shares. In some cases, angel investors merely get dividends from the startup’s owners.

Angel Investor Example

Hivers & Strivers, for example, is an angel organization that invests in the commercial initiatives of alumni of US military academies.