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Chapter 11. Other Venture Capital Investors > Private Investors (Angels)

Private Investors (Angels)

In recent decades, the community of private investors (angels) has developed to massive dimensions. Angels are private investors who invest some of their money in the financing of ventures with the hope of gaining a high return due to the large risk involved in the investment. The angels community is obviously diverse. Some angels have extensive experience in the area of entrepreneurship; others are entirely financial investors who have no understanding of the industry and whose money is usually invested by experts in the respective fields of the venture.

In the field of technology, private investors initially financed almost every successful company. Various research has found that more than one half of successful startups relied on financing from angels in their early stages. In addition, companies that reached IPOs without financing from venture capital funds, while relying mainly on angels, usually did so in earlier stages and after securing smaller investment rounds. These companies were generally from industries that do not involve extensive R&D efforts. In the United States, angels have a particularly large share in financing early-stage companies outside California and New England. This phenomenon is explained by the relative shortage of venture capital financing in these areas.


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