Angel Investors

When entrepreneurs exhaust personal resources and ‘friends and family’ if any, but are not ready to seek venture capital (about the usual stages of financing see other articles on the site) capital input from wealthy and interested individuals may be a good seed round. Such individual investors are usually experienced in business and finance individuals who are economically able and willing to handle the risks associated with the new business enterprise in hopes for higher returns. They are commonly called angel investors or angels.

 

Angel investors would be considered “accredited investors” and/or “sophisticated investors” under the federal securities regulations and thus can be approached and solicited by the entrepreneurs provided that other regulatory requirements are strictly observed. Angels do not usually seek a board representation or interfere with the company’s operation. This is more applicable when we deal with venture capitalists that are professional investors. Angel investors may request preferred shares and voting or veto power on some matters to protect their investment.  Usually they don’t participate in the future rounds of financing. Thus, angel funds are helpful at the beginning or intermediate stage of the business development.

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