Angel Investor (sometimes Business Angel) refers to a person who individually invests capital in enterprises or projects with high growth potential. Angel investor is essentially individual equivalent to organizations providing venture capital. Angel investor’s capital is part of private equity investments. It is a private capital.
A typical angel investor’s investment range is between 250 thousand and 2 million Euro. Angel investors are sometimes organized into groups (Angel groups) to accumulation of common capital. Angel investor with the ability to invest more than 2 million EUR is sometimes referred to as Superangel.
Use of the Angel Investment in practice: Obtaining funding through an angel investor is usually used by startups - small or medium-sized enterprises (SMEs) to finance the start of their business (usually development, project development) if they have lack of own financial resources or they are unable or unwilling to obtain financial resources another way on the capital or money market while having a great potential for growth.
This is one of financing options of usually innovative projects with potential for high growth. An investment from angel investor is usually directed into the business establishment - start-ups and further business development on the basis of quality and real business plan. Investments of angel investor can also be used as one of the tools in an extension of working capital.
Angel investor’s capital is usually inserted into the enterprise through equity and the investor in addition to this brings knowledge and expertise to developing the business beginner (so-called smart money), sometimes direct participation in the management of the enterprise and/or an assistance in expansion of business contacts. Angel investor expects a big return on capital employed (20-30 %).
- Financing of early stage business (e.g. market research, product or service development, creating a business plan, establishing the enterprise)
- Financing the product development (e.g. marketing, launching commercial sales)
- Financing growth to accelerate the expansion of the enterprise (e.g. increasing production capacity, entering new markets, increase in working capital)