Question

‘An affluent individual who provides capital for a business start-up and early stage companies having a high-risk, high-return matrix usually in exchange for convertible debt or ownership equity.’
(i) Identify the source to raise finance available to an entrepreneur discussed in the above lines.
(ii) State any four features of the source of raising finance discussed in (i) above.

Hint:

Angel Investors = Wealthy individuals funding start-ups early, usually in return for equity; they often bring both capital and guidance.

Answer 1

(i) Source of Finance:
The source of finance discussed is an Angel Investor.

(ii) Features of Angel Investors:

• High-Risk, High-Return Investment: Angel investors typically fund start-ups with high growth potential, which also carry a significant risk of failure.
• Equity or Convertible Debt: They usually invest in exchange for ownership equity or convertible debt in the business.
• Early-Stage Involvement: Angel investors generally provide capital at the seed or start-up stage when traditional investors may hesitate to invest.
• Affluent and Experienced Individuals: Most angel investors are wealthy individuals with experience in entrepreneurship or industry knowledge, often providing mentorship as well.