Which term describes an investor who uses personal funds to acquire equity in a startup?

Which term describes an investor who uses personal funds to acquire equity in a startup?

• A. Banks
• B. An individual who uses personal funds to acquire equity in a startup
• C. Corporate Partner
• D. Venture Capitalist

Answer: (B)

The key idea is investing personal funds directly into an early-stage startup in exchange for equity. This describes an angel investor, a person who uses their own money to back young companies and often offers guidance and networks in addition to capital. This differs from banks, which provide loans rather than equity and expect repayment with interest; from venture capitalists, who invest other people’s money through professional funds rather than their own funds; and from corporate partners, who usually invest for strategic reasons and through corporate structures rather than individual personal investments. The option that states an individual using personal funds to acquire equity matches the classic angel investor profile.

The key idea is investing personal funds directly into an early-stage startup in exchange for equity. This describes an angel investor, a person who uses their own money to back young companies and often offers guidance and networks in addition to capital.

This differs from banks, which provide loans rather than equity and expect repayment with interest; from venture capitalists, who invest other people’s money through professional funds rather than their own funds; and from corporate partners, who usually invest for strategic reasons and through corporate structures rather than individual personal investments. The option that states an individual using personal funds to acquire equity matches the classic angel investor profile.