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Angel Investor

Definition - What does Angel Investor mean?

An angel investor is an affluent investor who provides start-up capital in exchange for convertible debt or ownership equity. Angel investors also provide management advice and contacts. Angel capital fills the gap between friends and family who provide the seed capital and formal venture capital firms who provide start-up financing.

An angel investor is also known as a business angel.

Divestopedia explains Angel Investor

In many cases, retired executives or entrepreneurs who are interested in staying aware of developments in their own area of interest or making use of their experience on a less-than-full-time basis act as angel investors. Angel investors bear extremely high risk because they invest their own funds and are usually subject to dilution from future investment rounds.

Angel investors provide a one-time injection of money to support a firm through difficult times. They look for projects that are too young for banks or venture capitalists to take a chance on because they want to shy away from the risks. Non-traditional investors such as angel investors help out where friends and family approach is insufficient to meet a firm's capital investment requirements. The amount of capital raised via an angel investor is usually limited and they look for exceptional returns over a short time frame. Firm owners must be prepared to share the decision-making process with these investors as they tend to assess a firm's value proposition, management team, planning activities and competitive intelligence. The most attractive businesses for angel investors are those that allow them to share ownership for the short term, and then easily move on with the planned exit strategy.

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