Also called a seed or private investor, angel investors actively seek out opportunities to provide funding for entrepreneurs or start-up companies. They are often individuals with high net worth who are seeking new methods of expanding their wealth while simultaneously helping to launch an up and coming venture.
By investing, angel investors are not simply loaning funds to a project or company. Instead, they often require some percentage of ownership in the venture based on their initial investment. In some cases, the investment may occur continually, as the enterprise develops. But, it may also take place as a one-time contribution that helps the venture get started.
Angel investing tends to be beneficial for both the entrepreneur and the early investor. For example, the investor may find an opportunity to capitalize on earning interest at a rate they will not find in the standard financial market. For the entrepreneur, they are receiving funding at a level they may not otherwise have access to by applying to the typical loan entities, especially as a start-up.
Due to the risks involved, some angel investors also provide mentoring and business advice. This allows them to stimulate the venture’s success, so they are more likely to profit or at least recover their investment. Such support may come in different forms, from the planning to the development stage. It may also include help with networking, marketing, and advertising.
Angel investors play a significant role in economic growth. Outside of their potential personal gains by investing in a start-up, their funding helps to launch innovative ventures. Many of which would otherwise never exist, given the limited access to traditional funding sources. These ventures, in turn, help to create jobs and contribute new products and services to the economy.