An angel investor or angel aka business angel, informal investor, angel funder, private investor, or seed investor are all different names of an affluent individual who provides capital to company, for a business start-up in exchange for convertible debt or ownership equity.
Angel investors are popular among new-born startups, as they are known for investing in early stage startups providing financial backing to the company or entrepreneurs. In general, angel investors are found among the family, relatives or friends of an entrepreneur.
Typically angel investors invest their own funds, unlike to venture capitalists who manage other’s pooled money in a professionally managed fund. The capital provided by angels can be one time seed money injection or help for the company in difficult time. They are also known for sharing research, pooling their investment capital and providing advises to their portfolio companies.
Angel Investment Ranges From $25,000 to $1.5 Million or More
There is no fixed amount for angel investors, and the range can go anywhere from a few thousand to a few million dollars.
Typical angel investment starts from $25,000 to $1.5 Million (unlike to venture capital firms where average investment is usually between $500,000 to $5 million) and sometimes more a company.
But angels bear extremely high risks and are commonly subject to dilution from other investment rounds. They also require a very high return for investment as a large percentage (often 25% or more) of such investments are completely lost when startups fail in their early stages. That is why professional angel investors seek investments with potential to return 10x or more times their actual investment within a time period of 5 years.
Despite of the risk and disadvantages, angel investment in start-ups has been accelerating. Today, the number of angel investors who invest online through equity crowdfunding, organized angel groups or networks is higher and this investment type has many great success stories such as Facebook, WhatsApp and Uber etc.