An angel investor (also known as a private investor, seed investor or angel funder) is a high net worth individual who provides financial backing for small startups or entrepreneurs, typically in exchange for ownership equity in the company. Often, angel investors are found among an entrepreneur’s family and friends. The funds that angel investors provide may be a one-time investment to help the business get off the ground or an ongoing injection to support and carry the company through its difficult early stages.
Is an angel investor right for your business?
The most prominent advantage of an angel investor is that financing with an angel investor presents less risk than debt financing (a loan). In the event of business failure, invested capital does not have to be paid back and the majority of angel investors have a strong grasp on business and invest in a long term approach and are looking for a personal opportunity in addition to making the investment.
The biggest disadvantage of an angel investor is loss of majority control as part owner. The angel investor will have some say in in how the business should be run, as well the angel investor will receive some of the profits when the business is sold.
Debt financing (loans) have no say in the day to day operations or business practices.