Angel Investor

Angel investors (also known as private investors, seed investors or angel funders) are wealthy private investors focused on financing small business ventures in exchange for equity. Unlike a venture capital firm that uses an investment fund, angels use their own net worth.

Who is an angel investor?

Angel investors are normally high net worth individuals. Some of them have acquired the “accredited investor” status but this isn’t a prerequisite. The Securities and Exchange Commission (SEC) defines an “accredited investor” as one with a net worth of $1M in assets or more (excluding personal residences), or having earned $200k in income for the previous two years, or having a combined income of $300k for married couples. However, being an accredited investor doesn’t automatically make you an angel investor. 

What do they do?

Angel investors typically invest in early-stage companies that are riskier than more mature startups, with the purpose of seeking higher returns than available elsewhere. It is for this reason that investments in startups normally do not represent more than 10% of the angel investors’ total portfolio and are not the primary source of income for them.

In addition to providing capital, angel investors are a great source of information and industry knowledge. Angel investors are sought after for industry specific insights or access to unique networks. Due to the personal nature of angel investor support, their terms are often more favourable than those of institutional investors, as angels can rely solely on their intuition or the character of the founder.