Buzzword Buster – Angel Investor

Angel investors are individuals who provide much needed cash for early stage start-ups. While there are no hard and fast rules, typically angel investors provide substantial capital injections to early funding rounds, after founders have exhausted their own funds. They may also do this via private arrangement prior to formal funding rounds.

In return for providing capital to largely untested (and even unestablished) businesses, angel investors usually gain significant chunks of equity. Founders who are only interested in the funds provided by these individuals are usually missing a trick, because often the greatest benefit an angel investor can provide to a small business is the insight and experience they have gained from their often extensive career.

The name, quite obviously, comes from the idea that these investors are guardian angels selflessly defending the growth and prospects of start-ups against the varied corporate interests which surround them. While not intentional, the name is particularly apt as these people typically have a direct line to the gods of start-ups everywhere, the VC firms and scale enterprises which can make or break you.

Disagree or want to add something? What does Angel Investor mean to you?

Buzzword Buster – Seed Capital

Early stage investment in a start-up, prior to more formal funding rounds. Seed capital is usually provided by the founders themselves, their friends and family and other angel investors. It generally represents the first external injection of cash into a start-up.

Seed capital pays for a range of core activities including product development, customer testing and PR as well as providing salaries for early employees (although these are few and far between, and often on a temp contract basis). Because the amount available from seed funding is relatively low, it usually only provides a runway of a few months for start-ups to run their businesses for.

Seed funding has also been known to fund a series of ‘essential’ business trips around the world where founders try to sell their start-up idea to Venture Capital Firms and enterprise partners, enjoying nice hotels while they are at it.

 

Disagree or want to add something? What does Seed Capital mean to you?