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What Is an Angel Investor?


An angel investor (also referred to as a personal investor, seed investor or angel funder) may be a high net worth and individual who provides financial support for little startups or entrepreneurs, typically in exchange for ownership equity within the company. Often, angel investors are found among an entrepreneur's family and friends. The funds that angel investors provide are also a one-time investment to assist the business get off the bottom or an ongoing injection to support and carry the corporate through its difficult early stages.


KEY TAKEAWAYS

  • An angel investor is sometimes a high net worth and individual who funds startups within the early stages, often with their own money.

  • Angel investing is commonly the first source of funding for several startups who find it more appealing than other, more predatory, sorts of funding.

  • The support that angel investors provide startups fosters innovation which translates into the economic process.

  • These varieties of investments are risky and typically don't represent quite 10% of the angel investor's portfolio.

Understanding Angel Investors


Angel investors are individuals who seek to invest take a position within the early stages of startups. These varieties of investments are risky and typically don 't represent quite 10% of the angel investor's portfolio. Most angel investors have excess funds available and are searching for a better rate of return than those provided by traditional investment opportunities.


Angel investors are called informal investors, angel funders, private investors, seed investors, or business angels. These are individuals, normally affluent, who inject capital for startups in exchange for ownership equity or convertible debt. Some angel investors invest through crowdfunding platforms online or build angel investor networks to pool capital together.


Investment Profile


Angel investors who seed startups that fail during their early stages lose their investments completely. this can be why professional angel investors hunt for opportunities for an outlined exit strategy, acquisitions, or initial public offerings (IPOs).


The effective internal rate of return for a successful portfolio for angel investors is approximately 22%. This makes angel investments perfect for entrepreneurs who are still financially struggling during the startup phase of their business.


Angel investing has grown over the past few decades because the lure of profitability has allowed it to become a primary source of funding for several startups. This, in turn, has fostered innovation which translates into the economic process.


From Team,

Sunita Finlease


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