Angel Investing

Angel investing is typically done by wealthy individual investors who provide capital for a business start-up.

Usually the capital is provided to the start-ups in exchange for ownership in the company, but convertible debt and other types of arrangements are possible.

In many hot spots for angel investor investment activity, there are angel groups, also called angel networks, that share research and pool their investment capital for better investment results and a larger pool of available start ups to invest in.

The capital provided to these start ups is often from the angel investors themselves, and not raised from other investors.

Other providers of similar start up capital include friends, family, and for larger sums, venture capital companies. Banks also often provide various types of debt capital to start up companies.

The amount of investment capital from angel investors, on an annual basis, was in 2006 around US$25.6 billion, spread over 51,000 companies.

As of 2006, the most popular areas of investment for these investments were:

  • healthcare services, and medical devices and equipment, 21 percent of total angel investments
  • software (18 percent)
  • biotech (18 percent)
  • remaining investments were approximately equally weighted across high-tech sectors

According to one of the companies that analyze the angel investment market, the Center for Venture Research, there were 234,000 active angel investors in the U.S. in 2006.

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