[1] The application of the term "angel" originates in Broadway theater, where it was used to describe wealthy individuals who provided money for theatrical productions that would otherwise have had to shut down.
[4] This term, however, was not used in the context of investing in companies until 1978, when William Wetzel, a then-professor at the University of New Hampshire and founder of its Center for Venture Research, completed a pioneering study on how entrepreneurs raised seed capital in the US.
[citation needed] These reasons include wanting to keep abreast of current developments in a particular business arena, mentoring another generation of entrepreneurs, and making use of their experience and networks on a less than full-time basis.
Because innovations tend to be produced by outsiders and founders in startups, rather than existing organizations, angel investors provide (in addition to funds) feedback, advice, and contacts.
[7] In the late 1980s, angels started to coalesce into informal groups with the goal of sharing deal flow and due diligence work and pooling their funds to make larger investments.
Angel groups are generally local organizations made up of 10 to 150 accredited investors interested in early-stage investing.
A Harvard report[11] by William R. Kerr, Josh Lerner, and Antoinette Schoar provides evidence that angel-funded startups are more likely to succeed than companies reliant on other forms of initial financing.
Although it is usually difficult to raise more than a few hundred thousand dollars from friends and family, most traditional venture capital funds are usually not able to make or evaluate small investments under US$1–2 million.
[18] Much like other forms of private equity, angel investment decision-making has been shown to suffer from cognitive biases such as the illusion of control and overconfidence.
After they are founded, they are actively engaged in the management of startups, typically in a non-executive position, supporting the day-to-day running of the business.
Entrepreneurs, such as Jack Ma of Alibaba Group and many others, needed to raise funds from Softbank, Goldman Sachs, Fidelity, and other institutions.
The UK Business Angel market grew in 2009 through 2010 and, despite recessionary concerns, continues to show signs of growth.
[15] Total angel investments in the United States in 2021 were $29.1 billion, an increase of 15.2 percent over 2020, with 69,060 companies receiving funding.
[7] In the United States, angels are generally accredited investors in order to comply with current SEC regulations, although the JOBS Act of 2012 loosened those requirements starting in January 2013.