An Angel Investor is an individual who invests their personal money in early-stage startups in exchange for equity ownership or convertible debt.
An angel investor is usually a high-net-worth individual (HNI) who provides funding to startups during their early or seed stage, when traditional financing options like bank loans are not available. Along with capital, angel investors often offer mentorship, industry experience, and business connections, which are extremely valuable for new founders.
Angel investments are considered high-risk, high-reward because startups may fail or take years to generate returns. In return for taking this risk, angel investors receive equity shares, meaning they become partial owners of the company. If the startup grows successfully or gets acquired, the investor can earn significant returns.
Angel investors typically invest smaller amounts compared to venture capitalists and are often the first external investors in a startup. Their support helps startups develop products, hire talent, and scale operations.
"A tech entrepreneur invests ₹50 lakh of personal funds in a new fintech startup at an early stage and receives 10% equity in return. This individual is acting as an angel investor."