(b) Who are called Angel Investors? Explain any five features of Angel Investors.

Question

Accepted Answer

**Angel Investors** are affluent individuals who provide capital for a business start-up and early stage companies having a high-risk, high-return matrix, usually in exchange for convertible debt or ownership equity. The term 'angel' originally comes from Broadway, where it was used to describe wealthy individuals who provide money for theatrical productions. Angel investors fill the gap in start-up financing between "friends and family" and formal venture capitalists.

Five features of Angel Investors:

1. **High Net Worth Individuals:** Most angel investors are current or retired executives, business owners, or high net worth individuals who have the knowledge, expertise, and funds that help start-ups match up to industry standards.

2. **High Risk Bearing Capacity:** As angel investors bear extremely high risk and are usually subject to dilution from future investment rounds, they expect a very high return on investment.

3. **Mentoring and Guidance:** Apart from investing funds, most angels provide proactive advice, guidance, industry connections, and mentoring to start-ups in their early days.

4. **Value Creation Objective:** Their objective is to create great companies by providing value creation and simultaneously helping investors realize a high return on investments.

5. **Keen Interest in Current Developments:** They have a sharp inclination to keep abreast of current developments in a particular business arena, mentoring another generation of entrepreneurs by making use of their vast experience.