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What Exactly Is An Angel Investor?
The term “angel investor” is officially defined as a private investor who offers financial backing to an entrepreneurial venture.
When several private investors form an organization to collective fund ventures, they are known as an “angel investor group.”
The act of providing the financial backing is known as “angel investing.”
The amount of angel financing is significant. According to the Center for Venture Research at the University of New Hampshire, last year 55,480 ventures were funded by angel investors totaling $19.2 billion.
This compares to only 3,808 companies which were funded by venture capital firms, although VCs invested $28.3 billion in these firms.
Part of the reason why angel investing is so prevalent is that there are numerous stories of companies who raised angel capital in their nascent stages and then went on to achieve massive success. According to "Growthink’s Step-by-Step Guide To Raising Capital from Angel Investors," among many others, companies that raised angel investments include Google, Amazon.com, Apple, The Body Shop, Kinko’s, Starbucks, Digg and LinkedIn.
So, who are these angel investors that fund early stage companies? Well, angel investors fall into two core categories: accredited angel investors and non-accredited angel investors. Accredited angel investors are those angels who meet certain criteria set forth in Rule 501 of Regulation D of United States federal securities laws.
The two most prevalent criteria within this rule include that the net worth of the angel investor exceed $1 million OR that the angel investor’s income exceeded $200,000 in each of the two previous years.
Angels who do not meet either of these criteria are known as non-accredited angel investors.
The key difference between raising capital from accredited vs. non-accredited angel investors is whether you need to must register the securities with the SEC or not.
We recently released a report - the Step-by-Step Guide to Raising Capital from Angel Investors, which explains exactly how to find angel investors and successfully raise angel funding.
Click here to learn more about this special report.