angel investor

Wealthy private individual who invests in a high-risk company, usually during its early stages of financing. In return for investing, the angel receives an equity stake in the company, usually a minority (less than 50%) stake. There must normally be sufficient prospects for growth, combined with an exit strategy, in order for an angel to invest.

Although attracted by above average rates of return on capital, angels are often actively interested in the type of businesses they invest in, and may be willing to participate in a non-executive director capacity. Angels will often make investment decisions more quickly than venture capital investors. A common strategy used by entrepreneurs is to use angels to raise seed capital initially, using venture capitalists for financing at later stages.