Angel investment: Get funding and support to grow your small business

Published Monday 27 October 2025

Table of contents

• What is angel investment?
• Who are angel investors?
• 5 benefits of angel funding
• 3 disadvantages of angel funding
• What angel investors look for in your business
• How much funding can you expect from angel investors?
• Choosing the right angel
• Making the deal
• Angel investment vs other funding options
• Managing your finances after receiving angel investment
• FAQs on angel investment

Key takeaways

• Prepare a compelling 60-second pitch that clearly explains your business model, specific funding needs, and projected returns before approaching angel investors.

• Evaluate potential angel investors by checking their industry experience, previous investment track record, and compatibility with your business goals and working style.

• Negotiate investment terms carefully with professional legal and financial advice, focusing on ownership percentage, control rights, and the structure of funding arrangements.

• Leverage your angel investor's industry expertise and network connections after securing funding, while maintaining accurate financial tracking to demonstrate progress and build trust.

What is angel investment?

Angel investment is funding from wealthy individuals who invest their own money in exchange for equity in your business. Unlike banks or venture capital (VC) firms, angel investors make faster decisions because they do not need multiple approvals.

Most new businesses struggle to get enough money to grow. Angel investment helps you access funds faster than traditional loans.

Angel investors often have business experience and can guide you as you grow your business.

Who are angel investors?

Angel investors are wealthy individuals who fund small businesses in exchange for equity. They're typically successful entrepreneurs or professionals with industry expertise.

Angel investors often share these characteristics:

• have backgrounds as serial entrepreneurs, executives, or high-net-worth professionals
• invest in businesses in sectors they know
• are found nationwide, not just in major tech hubs
• often value strong management teams over perfect business plans

Angel investment gives you funding and mentorship from experienced entrepreneurs. In 2022, angels invested over $22 billion in early-stage companies.

5 benefits of angel funding

Angel investment gives you these benefits over traditional business funding:

1. get faster approval, as decisions take weeks, not months
2. receive industry expertise and mentorship
3. benefit from the investor's personal commitment
4. access large amounts of capital at once
5. keep operational independence, as most angels do not demand board seats or control

3 disadvantages of angel funding

With angel investment, you share ownership and take on new responsibilities. Here are some things to keep in mind:

1. share 10–25% of your business ownership, sometimes more depending on the funding and valuation
2. work with investors who may influence major decisions
3. meet regular progress reviews and growth targets

What angel investors look for in your business

Angel investors review many proposals. They usually look for:

• build a strong, knowledgeable team
• create a clear business plan that shows how you will use the investment to grow
• show your business has potential to grow in a large market
• offer a unique product or service that stands out from competitors

How much funding can you expect from angel investors?

Angel investments usually range from $25,000 to $100,000. Groups of investors may pool funds, sometimes investing between $200,000 and $400,000 per deal.

Some invest more or less, depending on your business stage and industry. Because they use their own money, angel investors can decide faster than venture capital firms.

Choosing the right angel

To find the right angel investor, look for someone with experience in your industry. Angels usually invest in businesses they understand.

Where to find angel investors:

• AngelList (online platform)
• Keiretsu Forum (investor network)
• Angel Resource Institute (directory)
• Industry-specific investor groups

Evaluating potential angels:

• Check their references carefully.
• Make sure they aren't already investing in one of your competitors.
• Could you work with them? Personality clashes can be a problem.
• Investigate their previous investments: did they succeed or fail?
• Does their planned level of business involvement suit you?
• Do they have a history of sticking with businesses through thick and thin?
• Do they have useful contacts for business partners and future investors?

Making the deal

To make a successful angel investment deal, prepare well, communicate clearly, and negotiate your terms. Here are the steps:

• explain your business model, costs, and revenue projections in under 60 seconds
• specify the exact funding you need and why (for example, '$100,000 for three new store fit-outs and initial inventory, with three, six, and 12-month projections')

We've discussed investment pitches in one of our other guides but here are some additional considerations when dealing with angel investors:

• Be direct: Share all relevant information with angel investors. Be open about any challenges in your business plan.
• Be prepared for questions: Angel investors will review your business plan closely. Be ready to answer questions and explain your assumptions.
• Negotiate terms: Decide what ownership and control you are comfortable sharing. You can negotiate everything, from ownership percentage and investment type to board seats and intellectual property protection.
• Structure the funding: Get financial and legal advice. Funding can take many forms, such as stock purchase, secured or unsecured loans, or convertible promissory notes. Make sure you understand your options.
• Check the big picture: Before you sign, review the deal with an accountant and a lawyer. Make sure you are comfortable with the terms.

Angel investment vs other funding options

Compare angel investment to other funding options:

• Bank loans: You get capital without giving up ownership, but you must repay the loan with interest. Angel investment gives you capital in exchange for equity, so you do not have monthly repayments.
• Venture capital (VC) firms: VC firms invest larger amounts than angels, with about $247 billion invested in 2022. They often take a formal role, including a board seat. Angel investment is less formal, involves smaller sums, and is more common for early-stage businesses.

Consider the trade-off between sharing equity and gaining capital and mentorship to decide if angel investment suits your business.

Managing your finances after receiving angel investment

Angel investment suits businesses that are ready to exchange equity for capital and expertise. If you want to keep full ownership, look at other funding options.

Angel funding has simpler terms and faster decisions than bank loans or venture capital. Get legal and financial advice before you sign any investment agreement.

Once you receive funding, use your angel investor's industry knowledge and contacts. Most angels support their companies because your success helps them too.

Managing your finances after angel investment becomes crucial for demonstrating progress to your investor. Accurate financial tracking helps you report on key metrics and plan for future growth milestones.

With Xero, you can manage your cash flow, track spending, and create financial reports for your investor. Xero helps you make informed decisions and show your investor how you use their funding.

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FAQs on angel investment

If you still have questions about angel investment, find answers to common questions below.

How do angel investors get paid back?

Angel investors make a return when the business is sold or merges with another company. This event, known as an "exit," allows them to sell their ownership stake, usually for a profit. Their success is directly tied to your success.

Is angel investment a good idea for my business?

Angel investment is a good option if you need capital to grow and are open to sharing ownership in exchange for funding and mentorship. It works best for businesses with high growth potential. If you want to keep full control, a traditional loan may suit you better.

What is the first step to finding an angel investor?

Start by refining your business plan and a short summary of your business. Then, network in your industry and use online platforms that connect entrepreneurs with investors. A referral from a trusted contact is often the best way to get an introduction.