What is angel investing? Angel investing is a type of venture capital investing whereby an affluent individual provides capital to a business start-up in exchange for equity in the company. Angel investors come from a variety of backgrounds, including entrepreneurs, executives, venture capital, and other investors. They usually provide financial support to early-stage companies, which are typically considered higher-risk investments.
Angel investing is not only about finding the right company for the angel, but also finding the right angel for the company. At best, angels can offer not only capital but also expertise and mentoring to the fledgling enterprise. Most angel investors are looking for a return on their investment within three to seven years, and often seek to exit the company through an initial public offering (IPO) or a sale to a larger entity.
An example of angel investing is the Render Capital Angel investment Network, a Louisville-based venture capital firm that has partnered with the Angel Capital Association to provide capital to startup companies. Another example is Michigan Capital Network, which is overseen by Durance and manages four venture capital funds and five angel investor groups.
In 2006, the Mumbai Angel Network was incepted, one of India's earliest angel investing platforms for early-stage ventures. Through the network, angel investors are able to connect with start-ups, helping to bring ideas to life and enabling the start-up to develop.
Angel groups, networks and syndicates are collections of people — who can be operators, founders or veteran investors — interested in investing in start-up companies. These groups focus on different sectors, such as health care, technology, biotechnology, and retail, and are often composed of experienced professionals who are well-connected in the industry.
Another high-profile angel investor is Chamath Palihapitiya, who is known as the SPAC King. Palihapitiya is now seeking investors for his blank check companies, which provide capital to take companies public. However, the angel investor has continued to back biotech stocks, such as Amgen, Alexion Pharmaceuticals, and Gilead Sciences.
Earlier, Indian angel investors were writing cheques under the Liberalised Remittance Scheme (LRS), which did not entail much compliance. However, with the introduction of the Angel Tax, angel investors have had to take measures to ensure compliance with the new regulations.
In conclusion, angel investing is an effective way of providing capital and expertise to start-up companies in exchange for equity. Angel investors come from a variety of backgrounds and have different investment strategies. Angel groups, networks and syndicates are an effective means of connecting start-ups with angel investors, and high-profile angel investors such as Chamath Palihapitiya have been successful in the industry.
