Angel investing is a type of private equity investing in which high net worth individuals, known as angel investors, invest their own capital into startup companies during early stages of development, receiving an ownership stake in return. Angel investors are generally wealthy individuals who invest in business ventures and provide capital for startups that need quick funding. They are welcomed by cash-hungry entrepreneurs who cant get conventional bank loans or dont want the burden of big debt until their ideas take off. Angel investors are often accomplished entrepreneurs themselves, and may have expertise or experience in the industry they’re investing in. They can bring guidance, networking, and knowledge to the startup company in addition to their capital investment.

Angel investors prefer to get involved in the early stage of a company, at the “seed” or “angel” funding phase. That could mean the angel invests when the company exists only as an idea, or it could come when a business is already up and running. Angel investors provide up to 90% of outside equity raised by startups (excluding friends and family). Angel investors often bring strategic industry knowledge to the company, taking an active role as a director or advisory board member.

Angel investors have a genuine interest in innovation and a desire to be involved. Many have been entrepreneurs in the past. Anyone who has the money and the desire to provide funding for startups can be an angel investor. Angel investors expect to take ownership positions in the companies they support because their capital is unsecured—they have no claim on the company’s assets. Their ownership may take the form of equity or convertible debt. The goal of an angel investor is to help businesses get established. Their funding terms are often more favorable than those of other lenders.