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An angel investor or angel (also known as a business angel or informal investor) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital.

Angel investors are individuals who invest in businesses looking for a higher return than they would see from more traditional investments. Many are successful entrepreneurs and business people who want to help other entrepreneurs get their business off the ground. Usually they are the bridge from the self-funded stage of the business to the point that the business needs the level of funding that a venture capitalist would offer. Funding estimates vary, but usually range from $50,000 to $2 million.

Make no mistake: all angels invest for just one primary reason - to increase their wealth. Their money is not free, and they will expect a sizable return in the long run. Many will be willing to wait four or five years to get their money back, but by then they will expect a return of two or three times their original investment.

Even if it's not clear to you at the beginning, an angel will always be looking for an exit strategy, and it's your job to provide one. Angel capital is flexible but expensive. Even though angels will give you several years to generate a return, they will expect to be well compensated for their patience. Rates of return north of 30% compounded per year are not uncommon targets.

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