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A new term in India’s financial market, introduced in the Union Budget 2013–14 which announced that SEBI will soon prescribe the provisions by which the angel investor can be recognised as Category I AIF 13 venture capital funds.
Angel investor is an investor who provides financial backing to entrepreneurs for ‘starting their business’. Angel investors are usually found
among an entrepreneur’s family and friends but they may be from outside also. The capital they provide can be a one-time injection of seed money or ongoing support to carry the company through difficult times—in exchange they may like owning share in the business or provide capital as loan (in case of a loan they lend at more favourable terms than other lenders, as they are usually investing in the person rather than the viability of the business). Other than investible capital, these investors provide technical advices and also help the ‘start-up’ business with their lucrative contacts.
They are focused on helping the business succeed, rather than reaping a huge profit from their investment. Angel investors are essentially the exact opposite of a venture capitalist in their ‘intention’ (who has high profit prospects as their prime focus). But in one sense both—an angel investor and a venture investor—serve the same purpose for the entrepreneur (who is in dire need of investible capital).