Angel investment – what it is, advantages and disadvantages for startup founders

Starting a business is exciting, but if we're being honest, it is also expensive. If you're building an app or launching a product, chances are you'll need more than just a great idea to begin with. Simply put, you'll need an angel investment, which comes from individuals who back early-stage startups with their own money. As the financial side of things is also important for growth, using tools like Wise Business makes handling money internationally a lot easier.

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What is angel investment?

Angel investment is when a high-net-worth individual¹ decides to back an early-stage startup in exchange for equity (a piece of the company). These angel investors are usually successful entrepreneurs or experienced professionals who are not just handing over a loan that you need to repay next month. Instead, they're investing because they believe in the idea, the team, and the long-term potential.

The money is important, but what really sets angel investors apart is everything else they bring with them. Many angels have been through the highs and lows of building a business themselves². So, along with funding, they often offer mentorship, connections, and guidance.

Investing as a group

While some angels invest solo, it's common for them to team up and invest as a group, which is known as a syndicate. This gives startups access to more funding while the syndicate investors can spread the risk. Within these groups, there's usually a lead angel – someone who takes point on negotiating the deal, coordinating the group, and staying closely involved with the startup.

If you're based in the UK and want to go down this particular route for your startup, there are two good places to start. Look into the UK Business Angels Association (UKBAA), the UK's national trade body for angel investors. You should also explore organisations like Angels Den, whose platform helps connect startups with active investors.

Advantages of using angel investors

As with any other type of funding, there are several angel investment advantages and disadvantages you should think about before you make up your mind. As angel investors can be a good solution for bridging the financial gap, they can become genuine allies in your startup journey. Let's focus on the benefits first².

They're faster and more flexible than institutions

Compared to venture capital firms that usually have layers of approval and a long due diligence process, angel investors usually make decisions quickly. Sometimes, it's a matter of weeks. They have more freedom to back ideas they personally believe in, even if those ideas don't fit a strict checklist.

You get more than just money

Most angels aren't passive investors. Maybe they've been in your shoes before, so they'll offer advice, share what's worked for them, and introduce you to people who can actually help move your business forward. For a lot of founders, that kind of real-world support can matter just as much, if not more, than the funding itself.

They take early-stage risks

Angels tend to get involved when your startup is still at a very early stage, and can even choose to back you up even if you only have a prototype or an idea. This is the phase where traditional lenders and most VCs tend to back off, so angel investment can be crucial in helping you get off the ground.

You keep more control (compared to VCs)

Angel investments usually come in smaller amounts than venture capital, which can be a big advantage for founders who want to keep more control. You get the funding you need without having to give away a big slice of your company or hand over major decision-making power. It can make all the difference for those who want a firm seat at the head of their startup.

Disadvantages of using angel investors

While this type of funding can offer a lot of value, it's not always the perfect fit for every startup. There are a few things to consider before jumping in first³:

You're giving away equity

Even if the investment is relatively small, bringing on an angel usually means parting with a slice of your company. That might feel like a fair trade early on, but over time, giving up equity can reduce your ownership and influence.

Expectations can vary

Some angels are hands-off and let founders get on with things. Others like to be regularly updated, have a say in key decisions, or even want a seat at the table. And let's not forget that they're usually hoping for a solid return on their investment. That kind of pressure isn't for everyone. If you're not on the same page from the beginning, things can quickly get complicated.

Is angel investment right for me?

Angel investors can be a great fit for early-stage startups⁴, especially if you're looking for more than just money. Their flexibility⁵, speed, and willingness to take risks can offer a much-needed boost when you're just getting off the ground. Plus, the right angel can bring industry insight, networks, and mentorship to help you grow faster.

But keep in mind that they're not the only option out there. Venture capital might be more suitable if you're aiming to scale quickly and need access to much larger sums of money. Financing options such as crowdfunding might also be a better choice for you, especially as you can use your own community support without giving away equity upfront.

In the end, the best choice will depend on your goals, your business model, and how much ownership you're comfortable sharing. As an angel investment can easily open doors, it can also lead you down a path you're not comfortable with.

Grow your company and go global with Wise Business

While you're exploring ways to fund your startup or small business, it's also a good time to check that your business account is working for you and not against you. If global growth is what you aim for, preparation matters. The right solution is to set up a Wise Business account, as it helps you manage finances with ease, even internationally.

With Wise Business, you can send, spend, and receive like a local in over 40+ currencies, and all from one account. Our multi-currency account makes it simple to pay overseas suppliers, freelancers, or partners without the hidden fees and markups you get from traditional banks. Plus, the Wise Business debit card lets you spend globally in more than 40+ currencies, with low conversion fees.

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Sources used in this article:

Sources checked on 13-May-2025