Fundraising & Equity
Definition
An angel investor is a high-net-worth individual who provides early-stage capital to startups — typically between $25K and $500K — in exchange for equity, usually before institutional venture capital is available.
Angel investors fill the funding gap between friends-and-family money and institutional venture capital. They invest personal funds (unlike VCs who invest from a pooled fund), typically at the pre-seed or seed stage when the company may have little more than a prototype, early traction, or a compelling founder. Angel investments are usually structured as SAFEs, convertible notes, or priced equity rounds. Angels often invest individually or through organized angel groups (e.g., AngelList syndicates, Tech Coast Angels, Golden Seeds) where deal flow and due diligence are shared. The typical angel check ranges from $25K to $250K, though super-angels may write checks up to $1M. Most angels are accredited investors (SEC definition: $200K+ annual income or $1M+ net worth excluding primary residence). Returns follow a power-law distribution — most angel investments return zero, while a small percentage generate 10–100× returns. The QSBS (Qualified Small Business Stock) exclusion under IRC §1202 allows angels to exclude up to $10M in capital gains on qualifying startup stock held for 5+ years.
Raising angel capital is one of the most common ways early-stage founders fund their companies, but the legal structure matters enormously. A poorly drafted SAFE or convertible note can create cap table problems that haunt you through Series A and beyond. A startup attorney can ensure your fundraising documents are investor-standard and protect both sides, while a financial advisor can help you model dilution scenarios before you sign.