Angel Investor

Angel investors often provide the first outside money a start-up receives, after the founders' own savings and money from friends and family, but before venture capital firms become involved.

Angel investments are typically smaller than venture capital investments. Angels may invest alone or as part of angel groups or syndicates, which pool money and share research.

Many angels are successful entrepreneurs or experienced executives who, besides money, offer advice, industry contacts and mentoring. For example, a former technology executive might invest 50,000 in a promising software start-up and help the founders with hiring and introductions to potential customers.

Angel investing is very risky. Most start-ups fail, and investors may lose their entire investment. Returns usually depend on a small number of successful companies, and money may be tied up for many years before any return is possible.

In many countries, angel investing is limited to people who meet certain wealth or income thresholds, or who are classed as sophisticated investors. Some governments offer tax incentives to encourage investment in early-stage companies.