Angel Investors are wealthy individuals who give money to start-up companies, entrepreneurs and inventors under an arrangement that returns shares of the start-up or a percentage of earnings, states Entrepreneur Magazine. Listings such as the Angel Capital Association and Angel List facilitate networking among investors and start-ups.
Angel investors were once found through traditional channels such as the Chamber of Commerce, Small Business Development Centers or trusted financial advisers, according to Entrepreneur Magazine. However, a proliferation in angel investment has since given rise to listing services such as the ACA and Angel List, which are a primary means of locating angel investors, as of 2015. Entrepreneur notes that while many listings charge minuscule fees, some such organizations that are well-established, such as the Keiretsu Forum in Silicon Valley, charge prospects an initial fee of up to $1,500. Furthermore, independent registered brokers may aid start-ups in locating angel investors, charging fees as high as $10,000 while providing assistance in organizing business plans and presentations.
Angel Investors are required to have a net worth of $1,000,000 and earn a minimum of $200,000 per year, in accordance with the Securities and Exchange Commission's definition of accredited investors, explains Entrepreneur. The annual income of an angel investor averages in a range between $200,000 and $600,000. These individuals are not the richest among the wealthy and are looking to earn money themselves, which is why it benefits them to give money to start-ups they believe may have potential. Entrepreneur adds that angels typically expect a 20 to 25 percent return.