Business, Legal & Accounting Glossary
An angel investor is a private investor who provides capital for entrepreneurial start-ups or expansion. An angel investor acts alone or as part of a syndicate. An angel investor participates in the equity of the company by buying stocks or convertible debt instruments. The holding period is usually less than ten years. An angel investor usually operates a referral system to screen prospective ventures. Compared to a venture capitalist, an angel investor takes bigger risks and expects to make larger profits by investing in start-ups. An angel investor tries to minimize risks by restricting investments to familiar industries closer home. Also, syndicates allow an angel investor to diversify, spreading risk over multiple enterprises. Unlike a venture capitalist, an angel investor often has business experience relevant to the industry sector, adding value to the new venture and takes an active role in managing the company. Angel investor participation may not be suitable for entrepreneurs who are averse to such active managerial or advisorial involvement.
An individual who provides capital to one or more startup companies. The individual is usually affluent or has a personal stake in the success of the venture. Such investments are characterized by high levels of risk and a potentially large return on investment.
Angels are people who provide funding for very young companies to help get them started. The term comes from Broadway, where show backers have traditionally been referred to as “angels.” In venture capital, the term refers to an entrepreneur’s first investors who put their money in before there is a product or a viable business.
Angels are most often friends, relatives, or business acquaintances who, because of their belief in an entrepreneur’s abilities or in the value of his idea, are willing to invest significant sums of money in the entrepreneur long before his business is established. Most invest only a few times during their lifetime and are unsophisticated about investing in small companies. Many invest once, lose their money, and never do it again.
More often than not, an angel’s investment is poorly documented and not particularly well thought out. Because they lack familiarity with the types of problems young companies face and the difficulty of getting money out of a young company, angels often invest without obtaining an adequate method for cashing out. Entrepreneurs who value the friendship and commitment of their angels, however, will take pains to discuss how the angel can get his investment out so that both the entrepreneur and the investor share realistic expectations.
You may want to try and get in close with an angel investor so that you can find out where the good deals are.
The angel investor teamed up with the venture capitalist who was also investing in our company to provide the needed funding.
Dennis took a huge gamble and decided to act as an angel investor by providing funds for the startup company his nephew was starting.
invisible venture capital
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This glossary post was last updated: 30th December, 2021 | 0 Views.