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angel investor

Contributor(s): Ivy Wigmore

An angel investor, sometimes just referred to as an angel, is an individual who invests private funds in a company or product for personal reasons. The term is sometimes contrasted with venture capital investors, who provide seed capital for similar things from corporate or partnership funds, with financial gain the main motive. 

Motivations for angel investors include interest in a particular area or a belief in the product, as well as more personal reasons. For example, an individual with a disabled child might be motivated to invest in technologies that support accessibility. 

Angel was first used in this sense in the early 1900s, to refer to prominent businessmen who backed Broadway shows. The businessman was motivated by the prestige associated with involvement in an artistic venture, in addition to the potential financial gains from successful shows. Modern use of the term in this sense originated in a 1978 study by William Wetzel, a professor at the University of New Hampshire, on how entrepreneurs raised seed capital. 

Groups of angels sometimes organize as an angel network for more effective investing.

This was last updated in June 2013

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