Angel investors are a vital part of the economy. They help start-up and early stage companies develop to a point where:

1. Institutional venture capital or strategic investor funds may provide larger sums to enable growth.
2. Debt financing can be obtained from banks and other conventional lenders in support of growth.
3. A profitable liquidity event can occur through company sale or initial public offering.

Angels provide initial external funding and advice in exchange for part ownership of entrepreneurs’ dreams. The intellectual capital angels provide can be as important as the financial capital they provide.

Often angels form groups, which can be loosely or highly organized.

Funds invested in the U.S. by angel investors approximate total funds invested by professional venture capital funds.

There are currently about 2.5 million angels in the U.S., about 400,000 of whom are active in their portfolio companies. Angels invest in about 65,000 ventures annually with about 80% of that money going to startups at the seed stage. In contrast venture capital funds are responsible for less than 1% of the seed capital deals completed each year.

Angels take higher risks and invest at earlier stages than venture capital funds. In return they hope to reap larger returns.