What is an Angel Investor?

An angel investor or angel (known as a business angel in Europe), is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors are organizing themselves into angel networks or angel groups to share research and pool their investment capital.

Who Are Angel Investors?

Angel Investors are individuals who invest in businesses looking for a higher return than they would see from more traditional investments. Many are successful entrepreneurs who want to help other entrepreneurs get their business off the ground. Usually angel investors are the bridge from the self-funded stage of the business to the point that the business needs the level of funding that a venture capitalist would offer. Funding es timates vary, but usually range from $150,000 to $1.5 million.

Investor Profile:

Angel investments bear extremely high risk, and thus require a very high return on investment. Because a large percentage of angel investments are lost completely when early stage companies fail, professional angel investors seek investments that have the potential to return at least 10 or more times their original investment within 5 years, through a defined exit strategy, such as plans for an initial public offering or an acquisition. Current 'best practices' suggest that angels might do better setting their sights even higher, looking for companies that will have at least the potential to provide a 20x-30x return over a five- to seven-year holding period. After taking into account the need to cover failed investments and the multi-year holding time for even the successful ones, however, the actual effective internal rate of return for a typical successful portfolio of angel investments might, in reality, be as 'low' as 20-30%. While the investor's need for high rates of return on any given investment can thus make angel financing an expensive source of funds, cheaper sources of capital, such as bank financing, are usually not available for most early-stage ventures, which may be too small or young to qualify for traditional loans.

Univest Inc. is an Angel Investor that provides companies with the venture capital they need to complete projects.

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