Page 1 - LN 241606010111

TOPIC:CH-6 -RESOURCE MOBILIZATIONS

CODE: 241606010112

SUB-TOPIC: ANGEL INVESTORS AND VENTURE CAPITALISTS

NOTES:

Angel investors

An angel investor (also known as a private investor, seed investor or angel funder) is a high net worth
individual who provides financial backing for small startups or entrepreneurs, typically in exchange for
ownership equity in the company. Often, angel investors are found among an entrepreneur's family and
friends. 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.

Features of angel investors
The job of an angel investor is invaluable. They fill the gap in start-up or early stage financing between
"friends and family", by providing seed funding and formal venture capital.
(1) Most angel investors are current or retired executives, business owners or high net worth individuals
who have the knowledge, expertise, and funds that help start-ups match up to industry standards.
(2) As angel investors bear extremely high risk and are usually subject to dilution from future investment
rounds. They expect a very high return on investment.
(3) Apart from investing funds, most angels provide proactive advice, guidance, industry connections
and mentoring start-ups in its early days.
(4) Their objective is to create great companies by providing value creation, and simultaneously helping
investors realize a high return on investments.
(5) They have a sharp inclination to keep abreast of current developments in a particular business arena,
mentoring another generation of entrepreneurs by making use of their vast experience.

III. Venture capital
a. Venture capital is a form of private equity and a type of financing that investors provide
to startup companies and small businesses that are believed to have long-term
growth potential.
b. Venture capital generally comes from well-off investors, investment banks and any other
financial institutions. However, it does not always take a monetary form; it can also be provided
in the form of technical or managerial expertise.
c. Venture capital is typically allocated to small companies with exceptional growth potential, or
to companies that have grown quickly and appear poised to continue to expand.
d. Venture capital has been used as a tool for economic development in a variety of developing
regions. In many of these regions, with less developed financial sectors, venture capital plays a
role in facilitating access to finance for small and medium enterprises (SMEs), which in most
cases would not quality for receiving bank loans.
Features of venture – capital
Venture capital can best be characterized as a long-term investment discipline, usually occurring over a
five-year period that helps in the creation of:
(a) Early-stage companies,
(b) The expansion and revitalization of existing businesses, and