An angel investor or business angel is a wealthy person who provides his money to a starting-up business, usually in Exchange of the company’s shares.
Apart from the money, they also provide their business knowledge for contribuying to the company’s development.
Nowadays, the business angels are forming groups or joining in clubs for sharing their capitals.
Etymology and origin
The term originally comes from Broadway. They used to use it to describe people who invest their money in theatrical productions.
Then, in 1978, a University of New Hampshire professor, William Wetzel, develop a study on how entrepeneurs got starting capital in the USA, so as, he began to call “angels” to that investors who offered their money to them.
This investor is usually a successful entrepreneur who understands the market area in which the company which requires investment is.
They are often willing to invest in high-risk operations to get back high profits. Their capital can be ongoing support for helping the company when it’s in trouble or a one-time investment for the start-up.
Frequently, they invest in the person, not it the new business and they’re focused on the business succeed not it their profits.
Furthermore, there is no set amount so they can provide very high or very low quantities.
As Elisa Baraibar said in the “Creation Companies and Family Business” notes:
“Angel investments bear extremely high risks and are usually subject to dilution from future investment rounds. As such, they require a very high return on investment. Because a large percentage of angel investments are lost completely when early stage companies fail, professional angel investors seek investments that have the potential to return at least ten or more times their original investment within 5 years, through a defined exit strategy, such as plans for an initial public offering or an acquisition”