The following is my answer to a Quora question: “Do angel investors own part of the company?”
An angel investor is any individual who provides financial backing
for the company at its early stages.
Typically, this involves taking an equity stake. However, this may not be ideal, or the
investor wants to limit his risk exposure.
In such a case, they negotiate a debt to equity arrangement, where the funds
provided is considered a form of loan, which may be converted into equity at a
later stage. In this case, the investor
does not have an equity stake in the company, and he may not take it up in
future.
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