There are many types of investors out there, all with different profiles and focused on different asset classes. Among all these types of investors, there is one in particular that can truly mark the difference for entrepreneurs and young companies: Angel investors.
Angel investors are financial professionals, lawyers, businessmen or even former entrepreneurs who are looking for the next unicorn company. These are wealthy individuals willing to invest a significant amount of money in a startup business in exchange for a portion of the company and significant participation.
Generally, an angel investor needs to be an accredited investor, as defined by the SEC (Securities and Exchange Commission). What essentially means is having a +$1M net worth and a +$200K annual income (or +$300K jointly with a spouse).
The funds that an angel investor provides may be a one-time investment to help a business get off the ground, or it may be an ongoing capital inflow to support the company and help it through its difficult early stages.
Angel investors focus mainly on the idea they’re investing in rather than in the present situation of the business. Angels are there to help entrepreneurs get through the hard early stages of a business, and so offer more favourable terms in exchange for a large percentage of ownership.
In addition to the legal ownership of company assets, angels also contribute to the company through their expertise and advice, and essentially become a key aspect of that company’s future growth and performance.
Angel investing can be an incredibly rewarding experience, as it allows a given industry to evolve and see new and disruptive companies enter the playing field. Entrepreneurs can always use a helping hand during the beginning of the business journey, and angels are the ones who can be there to make their ideas come true.