Angel investors are usually wealthy individuals that provide start-up funding to companies in exchange for part ownership in the business they are providing funding for. Angel investors take on extreme risk and expect a high rate of return on their investments.
Although they are very strict on their rate of return, they are generally more laid back when it comes to the time frame of repayment. This is a drastic difference from Venture Capitalist who are very strict on when they get their return on investment. Angel investors also provide roughly one-seventh or more of the funding for start-up and early-growth firms in the U.S. This investment group far exceeds venture capital sources in volume.
Here is a "typical" profile of an Angel Investor:
- Angel investors prefer to invest in companies usually within one day of travel.
- An angel investor tends to invest with a group of other investors to maximize available funds while also reducing any investors single risk.
- Their typical investment range is usually from $10,000 to as much as $500,000.
- Angel investor involvement in your company is typically through board membership as a director. As a result, the angel investor does not seek as much control over decision-making as a venture capital firm would.
- While both a venture capitalist and an angel investor will seek a high rate of return on their investment, the angel investor will generally be less aggressive on valuation and is usually willing to wait longer for a payback.