Angel investors are wealthy individuals who invest their personal funds in small business ventures in exchange for equity. They differ from venture capital firms as they use their own net worth for investments.
Angel investors are generally more patient and flexible with entrepreneurs, providing smaller amounts of funding over a longer period of time.
However, they expect an exit strategy, such as a public offering or acquisition, to realize their profits.
- Having an angel investor means the business doesn't have to repay the funds as they receive ownership shares in exchange.
- Angel investing is typically for established businesses beyond the startup phase.
- Angel investors have a personal stake in the investment and are motivated to help the business succeed.
- They can provide guidance, mentoring, or direct management assistance to support the business
- Angel investors typically seek a substantial ownership stake in the company, typically ranging from 10% to 50%, and giving away excessive equity can result in business owners losing control.
- It is important to carefully consider the amount of equity given to angel investors to avoid losing ownership of the company.