The world of startups is where the most exciting and creative action is happening in today’s business world. Angel Investing is now entering the mainstream with more than USD $20 billion being invested annually in the US and EUR €7.5 billion in Europe, with a sustained growth over recent past years.
An Angel Investor (also known as a Business Angel, informal investor, angel funder, private investor, or seed investor) is a private individual, mostly high net worth, usually with business experience, who directly invests part of his or her personal assets in new and growing unquoted businesses. BA could invest individually or alternatively invest in syndicates where typically one angel in the syndicate takes a lead role. Besides capital, Angel Investors provide business management experience, skills and contacts for the entrepreneur. Good Business Angels can provide “smart and patient capital”.
Angel Investors are high net worth individuals who provide smaller capital injections (typically EUR €25 000 to €500 000) at an earlier stage than many venture capital funds are able to invest. They are increasingly investing alongside seed venture capital funds.
Characteristically, Angels contribute much more than just cash. Angels commonly have industry knowledge and access to powerful networks that they pass on to entrepreneurs. Angels often hold non-executive board or advisory positions in the companies in which they invest.
Angel Investors play an important role in the economy, and in many countries constitute the largest source of external funding, after family and friends, in newly established ventures. They are increasingly important in providing risk capital as well as contributing to economic growth and technological advances. Moreover, the supply of startup and early stage equity finance has to some extent become more dependent on Business Angels, as venture capital funds are not able to accommodate a large number of small deals, and the traditional source of startup and early stage financing – bank lending – is limited due to risk level and handling costs.
Angel Investors provide both financing and managerial experience, which increases the likelihood of start-up enterprises to survive. Given the importance of informal investors for the creation and maintenance of an entrepreneurial economy, fostering their investment could have a significant leverage effect. Increasing the awareness about their activity or about available policies and programmes in some countries or regions (best practices), positively impacts the industry, SME financing, and regional development.