Angel investor
Also called: Angel funding, Business angel · Topic: Financial Markets, Instruments, Insurance and Pensions · NCERT: Beyond NCERT
Meaning
An angel investor is a wealthy individual who puts personal money into early-stage start-ups. In return, the angel gets a share of ownership (equity). Angels often invest before venture capital funds come in, when the business is little more than an idea and the risk of failure is high. Angel funds, which pool money from such investors, fall in Category I of SEBI's Alternative Investment Fund (AIF) rules.
Example
Start-ups that raised money from angels at a price above the share's fair value used to face "angel tax" under section 56(2)(viib) of the Income-tax Act. The excess was taxed as income. Budget 2024-25 abolished this tax, which made early-stage fund-raising easier.
Don't confuse with
- Venture capital (VC): professional funds invest pooled money from many investors, usually after angels, in rounds from seed to Series A, B and C. An angel invests their own money.
Related concepts
- Mutual fund
- Net Asset Value
- Systematic Investment Plan
- Index fund
- Exchange-Traded Fund
- Gold ETF
- Fund of funds
- Real Estate Investment Trust
- Infrastructure Investment Trust
- Domestic institutional investors