In the world of ecommerce and the greater business community at large, angel investors are people who provide seed money and funding to startups, small businesses, and other similar entrepreneurial ventures. They usually provide financial help to a brand new startup in its early stages, though sometimes they can also provide support and carry an existing company through times of financial struggle.
How Angel Investors & Venture Capitalists Differ
Unlike venture capitalists who manage and use other people’s pooled funds for investments, angel investors use their own money. The capital that they provide is often offered in exchange for ownership equity or a share of the startup’s future profits. They may or may not be personally affiliated with the company that they are investing in, and depending on the terms agreed upon, they may be able to make decisions and exert influence over the company’s affairs.
Angel investing has taken off in recent times due to the huge number of startup success stories like Uber, Snapchat, WhatsApp and other high-profile companies. Individuals are slowly moving away from traditional investment vehicles and are seeking ways to invest money where there is the possibility of higher and more substantial returns. Provided that the startup’s product or service manages to catch the public’s interest, the profits gained through angel investing can be phenomenal. However, this kind of investing also carries with it a huge amount of financial risk.