An angel investor is an individual who provides capital to a business or businesses, including startups, usually in exchange for convertible debt or ownership equity in the company. Angel investors are generally high-net-worth individuals who invest their own money directly in emerging businesses. They are often retired entrepreneurs or executives who may be interested in angel investing for reasons that go beyond pure monetary return, such as wanting to keep abreast of current developments in a particular business arena, mentoring another generation of entrepreneurs, and making use of their experience and networks on a less than full-time basis.
Angel investors prefer to get involved in the early stage of a company, at the “seed” or “angel” funding phase. That could mean the angel invests when the company exists only as an idea, or it could come when a business is already up and running. Most angel investors are accredited investors, and many are current or former entrepreneurs themselves. Angel investments bear extremely high risks and are usually subject to dilution from future investment rounds. As such, they require a very high return on investment. Angel investors often bring strategic industry knowledge to the company, taking an active role as a director or advisory board member. Investments tend to be structured as either convertible debt or equity, depending on the preferences of the investor and company.
