Business angels are persons investing their own capital in start-ups directly. The term angel was first used in connection with finance to describe wealthy New Yorkers who invested in Broadway plays. The prototypical business angel, who invests in entrepreneurial start-ups, is about 50 years old, has high income and wealth, is well educated, has succeeded as an entrepreneur, and invests in companies located in the region where s/he lives. These investors generally invest in a single company and are looking for companies that have the potential to grow 30 to 40 percent per year before they are acquired or go public.
Business angels are persons giving financial assistance to a commercial venture, especially, in its initial stages, and receiving any profit’s share from it, but who don’t expect to get engaged in its management.
Business angels give money and generally, are interested in getting involved in the venture by acting as a mentor or guide. They give connections to their broader network for guiding the entrepreneurs in their new business ventures. They can be of different types. There are affiliated business angels which may include customers, suppliers, or even competitors. Again, they can be non-affiliated too meaning they are persons without an earlier connection with the business.
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