Promising businesses often need a boost in which case they turn to angel investors. As one of the most commonly used terms in startup lingo, an angel investor is defined as a high-net worth person who invests in small startups or entrepreneurs by backing them financially, usually in exchange for ownership equity.
An angel investor can be a single person or multiple people. Multiple angel investors are refered to as a syndicate. An angel investor, however, is not to be mistaken by a venture capitalist. The main difference between them is the fact that angels use their own money to invest in businesses, whereas venture capitalists generally use money pooled from companies, large corporations, and pension
Investments that angels make can range from a couple of thousand to a few million dollars, so there is no limit or set amount. However, since a large percentage of these investments are lost when early stage companies fail, angel investors bear extremely high risks. For that reason, they seek investments that have the potential to return at least 10+ times their original investment in a 5 year timespan.
One of the key feature of an angel investor is the ability to be a good judge of potential as they are investing in a founder's potential to live up to their own company's vision.
The reasons for angel investors to invest money in a business fall typically under these 3 categories:
-economic (return of the investment + financial gain)
-hedonistic (the thrill of creating something new)
-altruistsic (giving back to their community)
Apart from the return of the investment, angels are also looking for businesses with solid business plans, management team, and a viable exit strategy.
If you are looking for an angel investor, here are some of the notable angel investor listings: