What is an angel investor?

An angel investor is a wealthy individual who offers financial support to startups, typically in exchange for equity ownership or convertible debt. These investors often provide not only capital but also mentorship, guidance, and valuable industry connections to the entrepreneurs they support. Angel investors are crucial in the early stages of a business when obtaining funding from traditional sources, such as banks or venture capitalists, can be more challenging due to high-risk factors and lack of operating history.

In contrast to the other options, a group of venture capitalists generally refers to institutional investors who pool funds to invest in startups and emerging companies, usually at a later stage. A government-funded investment program signifies official funds allocated by a government entity to support businesses, which is distinct from individual investments made by angels. An employee stock ownership plan relates to company shares distributed to employees as part of their compensation, which does not involve external investment in startups. Thus, understanding the role of angel investors is essential for grasping the landscape of startup funding.