angel funding
Angel investors are high-net worth (accredited investors) who invest their own capital into a new venture and will often act as an advisor or even take an operational role in the business. Typically angels invest their own money. They can invest alone or in groups. Many cities, regions or states have angel-investor groups that share some overhead, pool capital, and review deals together.
Motivation and timing of investor
Angel investors can have a combination of motives:
- Financial returns
- Social status
- Economic development for a region they care about
- They desire to "give back" or want to help mentor younger entrepreneurs
In nearly all cases, angels are hoping for a good financial return. They understand that they are taking significant risks by investing in a new venture and by virtue of being accredited / high net-worth investors, they can "afford" to lose money. When an investment goes well, investors can often return in excess of 30%-60% per year.
Typical Amount of Funding
Angels can provide as little as $25-50K and as much as $1M+ in funding.
Availability
Angels on some level are the same as high net worth individuals. Nearly any high net worth individual could become an angel. However, there are also angels that have frequent investment experience and have invested in many companies. Some angels even do angel investing as a full-time job. Because you can find high-net worth individuals in nearly every city, angels are a broadly available source of enterpreneurial funding.
Here is a list of some of the more helpful angel directories:
Interest and Principal Payments
Angels usually invest to receive equity in return. Some angels will provide convertible debt which can convert to equity at their option at some future point, but they typically do not provide debt financing.
Equity
Angels will typically expect to own 10%-30% of your business after their investment, depending on the value of your company and how much money they put into the investment.
Control
Angels typically take a board seat on the boards of the companies in which they invest. If they bought preferred equity with their investment, then they can also enjoy many benefits that come with preferred stock relative to common.
validation / Other
Angels provide strong validation that your business plan or concept has merit.