Glossary - Angel Investor
An angel investor is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. Angel investors typically step in after the initial 'seed' funding round and before the venture capitalists. They are willing to invest in a company when it may be too risky for traditional lenders or venture capitalists.
Also known as
- Private Investor
- Seed Investor
- Informal Investor
Use cases examples
- Term Sheet: The angel investor agreed to provide $100,000 in seed capital as per the terms outlined in the Term Sheet, in exchange for a 10% equity stake in the company.
- Shareholders' Agreement: Under the Shareholders' Agreement, the angel investor was granted certain rights, including a board seat and a promise of regular financial updates from the company.
Considerations for investors
- Angel investors must conduct thorough due diligence to understand the risks involved with an early-stage investment.
- They should consider the potential for significant dilution in subsequent funding rounds and negotiate anti-dilution protections where possible.
- Building a diversified portfolio of investments can mitigate the risks associated with the potential failure of a single company.
Considerations for founders
- The equity or shares given to an angel investor will dilute the founder's ownership percentage in the company.
- Founders should carefully consider the valuation at which they accept money from an angel investor, as it sets a precedent for future investment rounds.
- The terms of any agreement with an angel investor should be clear on matters of control, decision making, and the investor's level of involvement in the company.
Get to know our world class tools and services
Transform your operations with world class tools
We have created several tools to help investors spot the best opportunities and manage their portfolio.
Let's unlock your business potential with Automations
Embrace the future with our tailored subscription service that combines strategic planning and practical implementation.