Angel investment refers to the financial support provided by individuals, known as angel investors, to startups or early-stage businesses. Typically, these investors have high net worth and extensive business experience. Unlike institutions such as venture capital firms, angel investors use their personal funds to offer this support directly.
Angel investors are attracted to startups due to potential high returns that come with investing early. However, this also means they accept significant risks. Because these investments are made during the initial stages of a company’s development, investors carry the possibility of losing their entire investment if the business fails.
Beyond financial resources, angel investors often contribute their expertise, guidance, and professional networks to the startups they invest in. This mentorship can be invaluable in helping young companies navigate crucial early growth stages.
Common arrangements for angel investment include equity stakes—meaning the investor receives ownership shares in return for their financial backing. Sometimes, investors may use convertible debt or other financial instruments as alternative forms of investment.
Ultimately, angel investment plays a pivotal role in bridging the gap between initial startup costs and subsequent funding stages, helping innovative businesses turn their ideas into reality.
