An angel investor (also known as a business angel, informal investor, angel funder, private investor, or seed investor) is an individual who provides capital to a business or businesses, including startups, usually in exchange for convertible debt or ownership equity. Angel investors often provide support to startups at a very early stage (when the risk of their failure is relatively high), once or in a consecutive manner, and when most investors are not prepared to back them. According to a survey of 150 founders conducted by Wilbur Labs, approximately 70% of entrepreneurs risk facing potential business failure, and nearly 66% risk facing this potential failure within 25 months of launching their company. A small but growing number of angel investors invest online through equity crowdfunding or organize themselves into angel groups or angel networks to share investment capital and provide advice to their portfolio companies. The number of angel investors has greatly increased since the mid-20th century.

The application of the term "angel" originates in Broadway theater, where it was used to describe wealthy individuals who provided financial resources for theatrical productions that would otherwise have had to shut down. This term, however, was not used in the context of investing in companies until 1978, when William Wetzel, a then-professor at the University of New Hampshire and founder of its Center for Venture Research, completed a pioneering study on how entrepreneurs raised seed capital in the US. He began using the term "angel" to describe the investors who supported them. A similar term, "patron", is commonly used in the arts.

Angel investors are often retired entrepreneurs or executives who may be interested in angel investing for reasons that go beyond pure monetary return.^{[citation needed]} These reasons include wanting to keep abreast of current developments in a particular business arena, mentoring another generation of entrepreneurs, and making use of their experience and networks on a less-than-full-time basis. Because innovations tend to be produced by outsiders and founders in startups, rather than existing organizations,^{[citation needed]} angel investors provide (in addition to funds) feedback, advice, and contacts. Because no public exchanges are listing their securities, private companies meet angel investors in several ways, including referrals from the investors' trusted sources and other business contacts, at investor conferences and symposia, and at face-to-face meetings organized by groups of angels where companies pitch directly to investors.

According to the Center for Venture Research, there were 363,460 active angel investors in the US in 2021. In the late 1980s, angels started to coalesce into informal groups with the goal of sharing deal flow and due diligence work and pooling their funds to make larger investments. Angel groups are generally local organizations made up of 10 to 150 accredited investors interested in early-stage investing. In 1996, there were about 10 angel groups in the US; by 2006, there were over 200.

Angel investors typically invest their funds (unlike venture capitalists, who manage the pooled money of others in a professionally managed fund). Although typically reflecting the investment judgment of an individual, the entity providing the funding may be a trust, business, limited liability company, investment fund, or other vehicle. A Harvard report by William R. Kerr, Josh Lerner, and Antoinette Schoar provides evidence that angel-funded startups are more likely to succeed than companies reliant on other forms of initial financing. The paper found "that angel funding is positively correlated with higher survival, additional fundraising outside the angel group, and faster growth measured through growth in website traffic".

Angel capital fills the gap in seed funding between "friends and family" funding rounds and more robust start-up financing through formal venture capital. Although it is usually difficult to raise more than a few hundred thousand dollars from friends and family, most traditional venture capital funds are generally unable to make or evaluate small investments under US$1–2 million. Additionally, on an annual basis, the combined value of all angel investments in the US almost reaches the combined value of all US venture capital funds, while angel investors invest in more than 60 times as many companies as venture capital firms (US$20.1 billion vs. $23.26 billion in the US in 2010, into 61,900 companies vs. 1,012 companies).

There is no set amount for angel investors. Investments can range from a few thousand to a few million dollars. The healthcare/medical industry accounted for the largest share of angel investments in 2010, with 30% of total angel investments (vs. 17% in 2009), followed by software (16% vs. 19% in 2007), biotech (15% vs. 8% in 2009), industrial/energy (8% vs. 17% in 2009), retail (5% vs. 8% in 2009) and IT services (5%). While more readily available than venture financing, angel investment remains extremely difficult to raise. However, some new models are being developed that are trying to make this easier.

Much like other forms of private equity, angel investment decision-making has often been affected by various types of cognitive bias, such as the illusion of control and overconfidence.