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Definition of an Angel Investor

We sometimes get asked "just what is a Business Angel?" They are not as some may think, sponsors or altruistic benefactors, although many are successful entrepreneurs who do wish to encourage others. First and foremost however, they are business people, looking for an interesting opportunity to make money.

Called an Angel Investor in the USA, or a Business Angel in the UK, they are normally a well-off individual that is looking for an investment opportunity in an area that they understand, or have an interest in, whereby they provide funding and sometimes expertise, in exchange for an equity share of the business.

This person is often a successful entrepreneur, who understands very well the particular market area that a company seeking investment is in and so is willing to invest in higher-risk, high-growth firms to achieve a greater return than they would see from more traditional investments.

These experienced Angel Investors will likely bring more than just funds to a young company, but also skills, knowledge, helpful advice and contacts.

Business Angels fill a very important gap in the funding cycle (see Funding a Business ). Venture Capital companies are mainly interested in later stage businesses and often at a higher amount of funding than Business Angels would consider.

The Angel Investor is happy to look at seed or early stage businesses and although some will consider investment at just the "idea" phase (if there is a compelling business plan), most would prefer that some effort has been made to prove the concept at least.

So what range of funding do these Investors get involved with? It can be as low as £5k up to an approximate maximum of £900k (sometimes as a consortium), so there is quite a breadth. However there are going to be many more in the lower end of the range than the upper.

The term itself comes from the early 1900's where wealthy businessmen who invested in theatre productions were known as Angels.

If you are an Investor, or thinking about becoming an Investor, you should also have a look at our Useful Investor Risk Information

Members can also access Writing Business Plans for Angels