An angel investor is a High Net Worth Individual (HNWI) or High Income Earner (HIE) who invests his personal disposable income in start-ups or early stage businesses, usually in exchange for equity. An angel uses their personal disposable income and business or professional experience to invest in the growth of small businesses, generally in start-up or early stage businesses.
An angel investor can make investments on their own or as part of a group (syndicate), usually led by a lead angel investor. An angel investor normally does not only make an investment into a company but they also share their knowledge, experience and networks to guide and value-add to their investee companies. Angels bear high risk and are usually subject to equity dilution from future investment rounds. Several criteria to describe angel investors include:
The individual must be high net worth and successful.
Invests his or her own funds.
Well connected with the relevant people in the industry.
Have good business acumen.
Must be committed with the business that he or she invests in.
Passionate risk taker.
Besides providing funds, angel investors can often provide valuable management advice and important contacts. Because there are no public exchanges listing their securities, private companies meet angel investors in several ways, including referrals from the investors’ trusted sources and other business contacts; at investor conferences and symposia; and at meetings organised by groups of angels where companies pitch directly to investor in face-to-face meetings.
In a research sponsored by Cradle Fund and conducted by the Technopreneurs Association of Malaysia (TeAM) in collaboration with the Malaysian Business Angel Network (MBAN) in 2016 titled “The Emerging Business Angel Market in Malaysia: A ‘State of the Nation’ Report”, it was stated that:
“Business Angels in this [Malaysian] sample are impressive as they are highly-educated hands-on investors who effectively co-invest primarily in seed- and early-stage companies that operate in Malaysia and ASEAN. These business angels have access to significant amounts of investment capital and generally report favorable returns in spite of their limited time of private-equity investing in an emerging economy that provides minimal protection to minority shareholders.”
To join MBAN as an accredited angel investor, please click here.