What is ‘Angel Investing’?
Angel investing or seed investing is when an individual invests in a startup or entrepreneur. It is usually the first time that money is invested in a company, hence the name ‘seed’. It is literally planting the seed for a company! In return, you will own a (small) part or share of the company. That means that you won’t get any fixed interest payments, but you might get dividends when the company makes a profit.
Angel investing in startups can be very lucrative, if the company grows significantly and becomes successful. However, angel investing is considered a risky investment strategy; it is uncertain whether you will get (a part of) your money back and you can lose it all. Because you own a share in the company, you can only get your money back when another investor buys it or the company is listed on a stock exchange. This might take up to 10 years! It is therefore highly recommended that you never invest with money that you can’t afford to lose.