What is an angel investor?
Start-ups can be funded by various means, one of which is an angel investor. Angel investors are affluent individuals who use personal wealth to support start-ups through the difficult early stages. Angel investors acquire an ownership stake in the business in exchange for their investment. This stake usually takes the form of equity, but can sometimes be convertible debt.
What do angel investors look for in potential investments?
An angel investor considers many factors when making the decision to invest in a business. These include, but are not limited to:
- The potential for good returns;
- A valid reason to invest, whether it be economic or altruistic;
- Committed and passionate founders; and
- A well-developed business plan.
At what stage do angel investors start investing?
Angel investors usually invest at the early stages of a business. Whilst they are a valuable source of initial investment, they are not the only option available. Read our handy guide to supporting a business with limited cash for an early stage business.
Whilst the majority of investments happen in the early/seed stages, later stage capital raising is useful for growth. Read our guide to raising capital to get a grasp of the different stages of capital raising.
How do angel investors differ from venture capitalists?
The terms ‘angel investors’ and ‘venture capitalists’ are often used interchangeably. However, there are subtle differences between the two. The principal difference is that whereas an angel investor is an individual investing private wealth, a venture capitalist is generally a group of investors using a pool of investor capital to invest in a venture. A necessary consequence of this difference is that the amount of money a venture capitalist can invest is substantially bigger than an individual angel investor.
Conclusion
There are many implications flowing from where you source initial investment. The most notable is the degree of control you maintain over your start-up. It is important to get the decision right therefore there are many benefits of hiring a capital raising lawyer. LawPath can connect you with a capital raising lawyer through our lawyer marketplace who can assist you with these decisions.
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