Angel Investors Key Terms

Some key terms for how angel investors can help businesses
By J. Stoltzfus, writer/programmer LOCAL CITIZEN Though it may sound profoundly un-businesslike, angel investor is a common term for a philanthropist or other party who invests personal funds in a startup or new business. Angel investors commonly act as the "guardian angels" of new businesses by contributing needed capital just when it is crucial for the business to survive. Knowing some of the key terms regarding this type of investment partnership will help any business involved in or seeking angel investing.

Startup

A business "startup" is a business that is being built from the ground up, with little established market share, and generally, not a lot of capital. These businesses often seek angel investors, and vice versa.
Try:  See more on aspects of a startup at Young Entrepreneur.

Venture capitalist

A venture capitalist, like an angel investor, is a party that seeks to invest money in some kind of business venture to get profit later. Though the role of the venture capitalist is similar to that of an angel investor, some experts identify several key differences, including the general point of entry into a deal, and the idea that an angel investor's offering frequently comes from a "personal" fund, where a venture capitalist is more likely to have accumulated a larger source of capital from a group of investors.
Try:  See more on the life of a venture capitalist from the Princeton Review.

Rate of return

The rate of return on an investment is the amount an investor can expect, adjusted to provide a specific amount of profit, from an original investment. Angel investors generally seek a rate of return on their contributions.
Try:  See more on the rate of return at Investopedia.

Business plan

A business plan is something that angel investors often look at to see if they are going to be involved in a certain startup or business venture. The business plan is a document that lays out a lot of critical info about how a business is planning to operate and what investors can expect.
Try:  See more on business plans at BPlans.com.

Pitch meeting

The pitch meeting is a "date" that a startup or business will have with an investor or a pool of investors to get the details out and talk about the possibility of a financial partnership. These are a common part of the experience for angel investors.
Try:  See more on pitch meetings at Gigaom.

Exit strategy

Another thing that angel investors will generally want is an exit strategy. An exit strategy in business is a plan for allowing investors to opt out of a venture and collect their original contribution plus their rate of return amounts. This is going to be a factor in the success of any venture funded by angel investors.
Try:  See more on exit strategy at WiseGEEK.