Angel investors. It just sounds sweet, doesn’t it? And for the most part, the name fits. Angel investors are bold risk takers who put their money and trust behind an entrepreneur and an idea.
An angel investor is an investor who comes around early on in a startup. Angel investors can be family, friends or other usually high net worth individuals (cha-ching!) who provide funding to an emerging company with the assumption they will receive a return on their investment in the coming years. In recent years, an increasing number of angels – particularly in high tech startups – are Venture Capitalists (VCs).
An angel investor might provide you with a one time lump sum to help you get going, or they might give you funds here and there over time to help keep your business afloat in the early and vulnerable stages.
Angel investors differ from other kinds of investors in that they are usually putting their money behind the person with the vision for the business as opposed to other kinds of investors who are only looking at the potential return as their motivation.
Other phrases used to describe these “angels” are informal investors, angel funders, private investors, seed investors or business angels.
The term “angel” itself has its origins on Broadway, when wealthy individuals would give money to get theater productions off the ground.
Being an angel has its price, though. Not just anyone can nab the lovely title. To even be considered an angel investor, the SEC says you need a net worth of at least $1 million and an annual income of $200,000.
Angel investors don’t have a safety net, either. If the startup they fund fails, they fail too. That investment money is gone – POOF – just like a guardian angel when he/she has finished a job. Overall, the success rate of getting a positive return as an angel investor is between 20 and 30%.
The normal range for an angel investment is $25,000 to $100,000, but of course, it can be a lot more as well.
If it wasn’t for our angel investor, my business would have never gotten off the ground. I hope to meet this angel myself one day…