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Angel investor definition

Angel Investors

Angel investors capitalists are individual who provides capital for a business or businesses start-up.

It happens usually in exchange for convertible debt or ownership equity.

  This  Angel investors capitalists usually give support to start-ups at the initial moments.

and also when most investors are not prepared to back them.

The small but increasing number of angel investors invest online through

equity crowdfunding or organize themselves into angel groups. 

Also, they may form angel investor networks to share investment capital.

  They support as well as provide advice to their various companies.

Over the last 50 years, the number of angel investors has greatly increased.

The application of the term “angel” originally comes from Broadway theater.

 where it was used to describe wealthy individuals who provided money for theatrical productions.

That would otherwise have had to shut down.

 In 1978, William Wetzel, a then-professor at the University of New Hampshire.

 Founder of its Center for Venture Research. 

Completed a pioneering study on how entrepreneurs raised seed capital in the US.

 He began using the term “angel” to describe the investors who supported them.

Angel investors are often retired, entrepreneurs or executives.

who may be interested in angel investing for reasons that go beyond pure monetary return.

These include wanting to keep abreast of current developments in a particular business arena.

mentoring another generation of entrepreneurs.

Also,  making use of their experience and networks on a less than full-time basis.

 This is due to the fact that innovations tend to be produced by outsiders and founders in startups.

rather than existing organizations, angel investors provide feedback, advice, and contacts.

 Also,  there are no public exchanges listing their securities,

and  private companies meet angel investors in several ways.

Furthermore,  referrals from the investors’ trusted sources and other business contacts.

Source And Extent Of Funding

Angels typically invest their own funds, unlike venture capitalists 

who manage the pooled money of others in a professionally managed fund.

 Although typically reflecting the investment judgment of an individual,

the actual entity that provides the funding may be a trusted business.

It may also be also a limited liability company, investment fund, or other vehicles.

  Also,   Angel capital fills the gap in seed funding between “friends and family.

and more robust start-up financing through formal venture capital.

Even though it is usually difficult to raise more than a few hundred thousand dollars.

Especially from friends and family.

 On an annual basis, the combined value of all angel investments

in some countries almost reaches the combined value of all US venture capital funds.

There is no “set amount” for angel investors; investments can range from a few thousand to a few million dollars.

Investment Profile

 Also,   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.

Additionally, angel investors often mitigate the risk of angel investment

 This is done   by allocating less than 10% of their portfolio to these types of investments.

The last years showed the emergence of founding angels as angel investors involved even before the foundation of a start-up.

Founding angels co-found start-ups together with scientists who bring in the technology on which the start-up is based.

 After foundation, they are actively engaged in the management of the start-ups,

typically in a non-executive position.

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Angel investor definition

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