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are people who provide funding for very young companies to help get them started. The term comes from Broadway, where show backers have traditionally been referred to as "angels." In venture capital, the term refers to an entrepreneur's first investors who put their money in before there is a product or a viable business. Angels are most often friends, relatives, or business acquaintances who, because of their belief in an entrepreneur's abilities or in the value of his idea, are willing to invest significant sums of money in the entrepreneur long before his business is established. Most invest only a few times during their lifetime and are unsophisticated about investing in small companies. Many invest once, lose their money, and never do it again. More often than not, an angel's investment is poorly documented and not particularly well thought out. Because they lack familiarity with the types of problems young companies face and the difficulty of getting money out of a young company, angels often invest without obtaining an adequate method for cashing out. Entrepreneurs who value the friendship and commitment of their angels, however, will take pains to discuss how the angel can get his investment out so that both the entrepreneur and the investor share realistic expectations. See: Adventure Capitalists, Cashing Out (or In), Seed Capital, Venture Capitalists. |
