Angel investors provide capital for start-ups bringing their innovations to the marketplace. Recently, with the huge growth in opportunities brought about by the internet, more and more small investors are providing 'angel' financing for these small, nimble companies. Angel investors typically invest between $5,000 to $40,000 in a start-up in its infancy. Sometimes, 'angels' are so convinced by an idea that they provide funds for a business that hasn't even been founded! Without these risk-takers, innovative and revolutionary advances in technology may not come to pass. The price is high, and start-ups often fail, but just one 'winner' can return twenty times the initial investment. In other words, an angel investing in fifteen companies needs just one success to make the investment strategy worthwhile. Of course, angels hope for a much better return. Because these investors at the beginning of the company there are many terms used in angel investing that reflect this early stage development. Here are some of the most important:
Angel investing is sometimes confused with venture investments. Angel investors fund at the initial entry level while venture capitalists usually wait until a young company has proven that their idea and has brought their product or technology to market. These companies then need larger investments to quickly grow and capture market share.
Key Vocabulary and Collocations
to bring about
to found a business
to come to pass
return (on an investment)
early stage development
to seed a company
to get in on the ground level
bring a product to market
to capture market share
Check your understanding with this multiple choice comprehension quiz.
By Kenneth Beare, About.com Guide