Table of Contents

How angel investing works

How angel investors make money from investing in a company

How angels choose their investments

Why angel investors would invest in a money-losing startup

What angel investors provide startups besides money

The bottom line

LearnAngel InvestingHow Does an Angel Investor Make Money?

How Does an Angel Investor Make Money?

Jun 21, 2022


7 min read

Angel investors make money by backing very early-stage startups they find promising, in exchange, they receive an ownership stake and expect returns if it succeeds.

Those who invest in assets that change hands at an agreed-upon price—like stocks, crypto, and real estate—know when they’ve made a profit: They sell the investment for more money than they paid for it. 

Angel investors, typically wealthy individuals who back early-stage businesses with their own capital, don’t have such easy yardsticks. They put their money into a startup and bet it will succeed based on scant data and their own judgment. Once they commit, they tie up their funds for an unknown period of time with no quick way to cash in—if they can cash in at all.

Angel investors make money when their stake grows in value, and they’re able to liquidate it in what's known as an exit. But if the startup fails—as most do—the investor gets nothing and loses their initial investment as well.

How angel investing works

Angels typically consider lots of early-stage startups and whittle down their investment choices to a few. Then, they provide funding to their chosen startups to cover costs until the business starts growing. Angels typically invest $5,000 to $150,000 per startup. In return, they receive an equity stake in the company. That averages around 20% but can rise to as much as 50% of a young company.

Investors and entrepreneurs may negotiate funding and equity details directly, especially in the earliest ventures. Investors also may use the company’s valuation to determine how much ownership to take. For example, if an angel invests $500,000 in a startup with a $2 million valuation, the company’s value jumps to $2.5 million and the angel’s equity stake in the company is 20%. 

How angel investors make money from investing in a company

Angels get their payback through an exit that lets them liquidate their stake and potentially make a profit that’s based on the percentage of the business they own. Generally, investors will pre-plan the details of the exit when negotiating the term sheet before they invest in the startup. 

Angels seek to recoup their initial investment and then some. There many kinds of exit strategies, the most common being:

  • Acquisition

    . Another company buys the startup. This usually generates a return on the angel’s initial investment because the sellers want to make a profit for the work they’ve put into building the company and want—or need—to repay their investors. 

  • Merger

    . A company buys the startup and melds it into an existing business. 

  • Initial public offering (IPO)

    . The startup goes public by offering stock on an exchange. Out of the plethora of startups, relatively few have IPOs. Those that do can have big returns because they’ve made it far enough in establishing a business to generate interest and support from investment banks, and to attract potential stock buyers. 

  • Venture capital buyout

    . Venture capitalists may invest in a startup after angel funding and then offer to buy out the angel investor.

  • Management buyout

    . A startup’s executives may combine their resources to buy back an angel’s equity. This occurs less frequently than other exits.

  • Retaining equity

    . An angel investor may also decide to stick with their investment if the company is profitable but isn’t planning a sale or IPO. In this case, an angel may receive a regular dividend for their ownership stake.

Most angel investments fail and the ventures never get off the ground. But sometimes small angel investments can deliver big payoffs. In 2010,Uber received 11 angel investments totaling $510,000. Some angels chipped in just $5,000; only one invested more than $100,000. The relatively small sums yielded huge rewards: When the ride-hailing company went public in 2009, the total angel investments were valued at about $2.5 billion.

How angels choose their investments

Studies suggest a portfolio of angel investments canreturn 27% or more— with many variations and caveats. Very few early-stage companies turn out to be Ubers. So how do angel investors decide where their money will make the most money? They consider several factors including the startup’s industry, growth potential, and management.

Growth potential

Angels will also consider the likelihood that a startup will grow. That helps them determine the potential return their investment could yield. Sectors with the highestreturns on equity in the first quarter of 2022 were:

  • Technology: 25.52%
  • Consumer non-cyclical: 16.19%
  • Capital goods: 15.26%
  • Retail: 14.03%
  • Basic materials: 13.61%
  • Transportation: 11.54%
  • Healthcare: 11.13%
  • Energy: 11.03%
  • Consumer Discretionary: 10.21%
  • Services: 7.35%

At Titan, we are value investors: we aim to manage our portfolios with a steady focus on fundamentals and an eye on massive long-term growth potential. Investing with Titan is easy, transparent, and effective.

Get Started


Angels want to know the startup they’re backing is in the hands of managers with solid skills. They look for:

  • Leadership

    . Are the entrepreneurs and their staff trustworthy, competent, and inspirational?

  • Financial acumen

    . Do managers understand finance and have a solid business plan with financial projections and detailed marketing?

  • Experience

    . Do managers have manufacturing, human resources, accounting, sales, research, or other skills their company relies on? Do managers have a track record of success with other companies?

Once an investor decides to invest, they gauge how much money to contribute and whether more is required. The lead investor teams up with the founder to bring in other investors. Most angels expect a formal shareholder agreement laying out the contingencies of their investment. A term sheet is a document that includes the startup’s valuation, deal flow, and the angel’s own due diligence. Lawyers draft definitive legal documents before any money changes hands. Everyone signs off on the closing package before the deal is final.

Why angel investors would invest in a money-losing startup

Some angel-backed companies have viable businesses but aren’t making a profit. These money-losing startups can still be appealing to angel investors, who invest in them for various reasons:

  • The company is growing

    . Angels may focus on growth potential and market share rather than profits. If a company is quickly winning more market share, that could lift revenue and valuations for future returns.

  • The company has intellectual property

    . A startup may have patents or copyrights that could be valuable to investors.

  • The company has valuable assets

    . Investors may sell off key assets that are more valuable than the whole company. The assets may be undervalued due to poor management or other reasons but may be attractive to outside buyers. When the assets are sold in a process known as asset stripping, investors can be compensated with a special dividend.

  • Market valuation

    . Investors may see the potential in money-losing companies that can achieve high valuations in an IPO. Angels typically invest early, when valuations are low. However, the outcome for investors, especially those in later stages, is not always positive. During the dot-com boom in the mid-1990s, profitless companies went public and their stock prices soared. The tech-heavy Nasdaq composite index peaked in March 2000; by October 2002 it had lost three-quarters of its value.

What angel investors provide startups besides money

Aside from providing capital to a startup, angel investors can help a young company grow by acting as:

  • Advisor.

    Angels can provide business advice and emotional support.

  • Networker.

    Angels can use their networks to attract customers and outside expertise.

  • Recruiter

    . Angels can help with interviewing and hiring employees. They can also refer people they’ve worked with.

  • Marketer

    . Angels can use their contacts and social media to create a buzz for their companies.

  • Technical expert

    . Angels with technical knowledge can apply their skills and test and review products.

  • Board member

    . Angels may take a board seat to dispense higher-level oversight and direction.

The bottom line

Angel investors make money by backing very early-stage startups they find promising, with investments typically ranging from $5,000 to $150,000. In exchange, they receive an ownership stake in the company and expect returns if the company succeeds. 

Angel investing is risky, though, with the potential for very big losses or, in a few cases, very big gains. While most angel-backed ventures don’t get off the ground, the few that do can provide outsized returns, turning thousands of investment dollars into fortunes.


Certain information contained in here has been obtained from third-party sources. While taken from sources believed to be reliable, Titan has not independently verified such information and makes no representations about the accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; Titan has not reviewed such advertisements and does not endorse any advertising content contained therein.

This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any strategy managed by Titan. Any investments referred to, or described are not representative of all investments in strategies managed by Titan, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results.

Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see Titan’s Legal Page for additional important information.

Three Things, a newsletter from Titan

Stay informed on the most impactful business and financial news with analysis from our team.

You might also like

Angel Investors vs. Venture Capital vs. Private Equity: Key Differences

When discussing investments, all three can fund startups and get paid out if the company is sold or goes public, these funding types have distinct differences.

Read More

Angel Investing vs. Private Equity: What Are the Differences?

Angel and PE investments both involve risk, high-net-worth individuals, and are made for the same reason but are two entirely different categories of private investment.

Read More

Angel Investing vs. the Stock Market: Similarities, Differences, Stakes

Individuals considering angel investing will find similarities to investing in the stock market. But angel investing involves more risk of failure than stock investing.

Read More

What Are Angel Investing Returns Like?

Angel investors can increase their chances of bigger returns by expanding their portfolios and providing their professional knowledge to get companies off the ground.

Read More

Cash Management

Smart Cash

Smart Cash FAQs

Cash Options

Get Smart Cash


© Copyright 2024 Titan Global Capital Management USA LLC. All Rights Reserved.

Titan Global Capital Management USA LLC ("Titan") is an investment adviser registered with the Securities and Exchange Commission (“SEC”). By using this website, you accept and agree to Titan’s Terms of Use and Privacy Policy. Titan’s investment advisory services are available only to residents of the United States in jurisdictions where Titan is registered. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities or investment products. Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections are hypothetical in nature and may not reflect actual future performance. Account holdings and other information provided are for illustrative purposes only and are not to be considered investment recommendations. The content on this website is for informational purposes only and does not constitute a comprehensive description of Titan’s investment advisory services.

Please refer to Titan's Program Brochure for important additional information. Certain investments are not suitable for all investors. Before investing, you should consider your investment objectives and any fees charged by Titan. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested, including principal. Brokerage services are provided to Titan Clients by Titan Global Technologies LLC and Apex Clearing Corporation, both registered broker-dealers and members of FINRA/SIPC. For more information, visit our disclosures page. You may check the background of these firms by visiting FINRA's BrokerCheck.

Various Registered Investment Company products (“Third Party Funds”) offered by third party fund families and investment companies are made available on the platform. Some of these Third Party Funds are offered through Titan Global Technologies LLC. Other Third Party Funds are offered to advisory clients by Titan. Before investing in such Third Party Funds you should consult the specific supplemental information available for each product. Please refer to Titan's Program Brochure for important additional information. Certain Third Party Funds that are available on Titan’s platform are interval funds. Investments in interval funds are highly speculative and subject to a lack of liquidity that is generally available in other types of investments. Actual investment return and principal value is likely to fluctuate and may depreciate in value when redeemed. Liquidity and distributions are not guaranteed, and are subject to availability at the discretion of the Third Party Fund.

The cash sweep program is made available in coordination with Apex Clearing Corporation through Titan Global Technologies LLC. Please visit for applicable terms and conditions and important disclosures.

Cryptocurrency advisory services are provided by Titan.

Information provided by Titan Support is for informational and general educational purposes only and is not investment or financial advice.

Contact Titan at 508 LaGuardia Place NY, NY 10012.