Question

What type of financing do "Angel investors" usually provide?
1. Debt
2. Equity
3. Stock sales
4. None of the above

Answer 1

Correct Answer - Option 2 : Equity

The correct answer is Equity.

• Angel investors are also called informal investors, angel funders, private investors, seed investors or business angels.
  • These are individuals who inject capital for startups in exchange for ownership equity or convertible debt.
  • An angel investor is a high-net-worth individual who provides financial backing for small startups or entrepreneurs, typically in exchange for ownership equity in the company. 
  • The funds that angel investors provide may be a one-time investment to help the business get off the ground or an ongoing injection to support and carry the company through its difficult early stages.
  • They seek to invest at the early stages of startups.
  • They have excess funds available and are looking for a higher rate of return than those provided by traditional investment opportunities.
  • They provide more favourable terms compared to other lenders.
  • They are focused on helping startups take their first steps, rather than the possible profit they may get from the business.