What is an angel investor and how does it work?


An angel is a high net-worth individual who invests his or her own money in start-up companies in

exchange for an equity share of the businesses. Other important things to know about angels include:


Many angels are former entrepreneurs themselves


They make investments in order to gain a return on their money, to participate in the entrepreneurial

process, and often to give back to their communities by catalyzing economic growth.



Angels make a return on their investment when the entrepreneur successfully grows the business and

exits it, generally through a sale or merger


Angels tend to invest in companies that are located near them regionally (or to co-invest in a wider

geography if a local investor they know and trust is involved)


What are angel groups?


In an angel group, individual angels join with other angels to invest collectively in entrepreneurial firms.

Angel organizations come in many forms, but all have certain characteristics:


They meet regularly to review business proposals


Selected entrepreneurs make presentations to the membership of the group


Member angels decide whether to invest in the presenting business


Angels work together to conduct due diligence to validate the plans, statements and history of the

entrepreneurial team


Other points of interest about angel groups are:


The size of angel group investments in entrepreneurial firms varies widely. Groups invest in innovative

firms in a range of industries. The most common, but not exclusive sectors of investment are software,

medical devices, telecommunications, and manufacturing.


While some groups focus on a specific industry area, the majority are open to a variety of areas and

select those markets with which some of their members have expertise

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