What is an Angel Investor?

Individual private investors who invest in entrepreneurial companies are commonly and affectionately known as "angel investors". They prefer to take an equity position in the company either directly through the issuance of shares or indirectly through other instruments that are convertible into shares.

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Since each angel investor is an individual, there are substantial differences between angel investors. The approach of an angel is more "seat of the pants" than a venture capitalist. A profile of a "typical" angel investor looks something like this:

  • income exceeds €100,000
  • 40-60 years old
  • net worth in excess of €1,000,000
  • previous successful entrepreneurial experience
  • expects to hold on the investment for up to five to seven years (but some angels wish to "cash out" after only a few years)
  • prefers to invest close to home
  • enjoys advising the entrepreneur and likes to be part of the action
  • invests up to €150,000 but may participate in a "syndication" of other angel investors bringing the total investment to multiples of individual investments
  • refers deals to other private investors even if the angel has chosen not to invest
  • likes to invest in an industry with which the angel is familiar
  • sources deals through referrals

 

A private source of capital is a: financial backer providing venture capital funds for small startups or entrepreneurs.

Generally your angel is a friend or family member. Another good reason to mark their birthdays on your calendar.

An angel investor is an individual who invests their personal money in entrepreneurs and their startup companies. These people are often entrepreneurs themselves or have wealth from their family, winning the lottery, or other good investments.

Angel investors are often the main source of funds for entrepreneurial firms and their numbers have been increasing dramatically over the past few years. Many well know companies today such as Ford, Apple and Amazon.com were started by angel investors.

One of the most important aspects of business angels is matching the right entrepreneur business with the right angel investor. There are risks and benefits for both parties involved but by matching the right entrepreneur with the right investor many of the risks can be decreased while increasing the benefits each receives.

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