What is Angel Investing?

And how the rules of angel investing have changed in our favor

Have you heard of companies like Uber, Airbnb, and Tesla? Of course you have. But did you know that when these blockbuster companies first started out, they received funding from angel investors?

Yep, before those brands became household names, they were “just” startups hoping to make it big. That's where angel investors came in. These investors put up relatively small amounts of capital early on to help get those startups off the ground and running.

Now you might be wondering, what exactly is an angel investor? Basically, it's someone who sees potential in an early-stage startup and is willing to take a chance on it by providing some of the initial seed funding it needs to grow. And get this – in exchange for taking on that early risk, angel investors get stock in that startup!

So if that startup really takes off – which some do in a major way like Uber and Airbnb – the angels’ small early investments can turn into massive windfalls down the road. Pretty cool, right?

But up until recently, angel investing was mostly limited to wealthy Silicon Valley insiders with all the right connections. You needed a high net worth just to get in the game, and you needed to know the right venture capitalists and founders.

Thankfully, that's all changed now. New regulations have opened up angel investing so that anyone can get involved, even with as little as a few hundred bucks.

So why should you consider becoming an angel investor?

Here are a few good reasons:

  1. You get the chance to realize absolutely enormous returns. When you invest early – before all the hype and high valuations – you're getting in at the ground floor. That means when the company eventually goes public and everyone wants in, you'll already be sitting on a potential goldmine!

  2. You can have real influence on a company's early trajectory. Imagine you had invested in Facebook (now Meta) or Google (now Alphabet) back in their dorm room days – well, technically Larry Page and Sergey Brin started Google in garage, but you get the idea. As an early stakeholder, founders would welcome your input and guidance.

Plus, the private equity market is going gangbusters right now with record amounts of capital being deployed – even as many investors shy away from public markets. So the time is definitely ripe to tap into this red-hot opportunity.

In a nutshell, angel investing lets everyday folks like you and me access deals that were once reserved for the ultra-wealthy. So if you think you've got an eye for spotting tomorrow's hottest startups, throw your hat in the ring and start building your angel investing portfolio!