If you’ve ever seen “Shark Tank,” you may have heard of the term angel investing. Like the sharks, angel investors are interested in early-stage investing and entrepreneurship. Unlike the sharks, angel investors generally look for longer pitches and invest in a greater variety of industries.
What is Angel Investing?
An angel investor is a person who helps get a start-up company on its feet. They provide the initial investment to help a new business flourish. Generally, angel investors are high net-worth individuals investing a large sum of their personal money. But, angel investors also include family and friends, groups, and crowdfunding.
The term, angel investor, was initially used on Broadway to describe wealthy theatre patrons who would invest in their favorite productions when theatre budgets were low. In return, they became “insiders” in the show. The cast and production team included the angels in backstage activities and social gatherings.
The Pros and Cons
Angel investing spurs economic activity and innovation. It can create new jobs, products, and industries that become staples in the national economy
However, early-stage investments are high risk. As, angel investor Joe Milam says, “There won’t be a positive financial return for everybody, but any healthy ecosystem (I like the compost pile analogy) needs lots of organic material to fuel future germination and growth.”
Because of the risks, early-stage investments generally make up less than 10% of an angel investor’s portfolio.
Invested Interests’ Take
Angel investments have a high risk for individuals and a high potential for economic innovation. So, while start-ups shouldn’t be the only companies in your investment portfolio, angel investing can fund big ideas that make our world a better place. And, in that way, it’s an important part of investing in change.
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