Meaning of Promoter, Venture Capitalist and Angel Investor

Every industry has some oft-repeated words. Promoter, Venture Capitalist, and Angel Investors are some of the terms you must have come across if you read news about stock market, companies, IPOs, shares, etc. Do you know what these terms stand for? Let us understand the meaning of these terms.

Who is a Promoter?

A promoter, also called a corporate promoter, can be a person or a firm that is involved in the formation of a company. When we say formation, it includes every step including promotion, incorporation, and flotation, and also arranging for initial funds for the company.

A promoter holds a position of utmost good faith for the company they promote. Hence, the law requires a promoter to avoid any conflicts of interest while promoting a company. A promoter is personally liable for any false statement in the prospectus of a company.

Who is a Venture Capitalist?

A venture capitalist is a person or a company that invests in a business venture if they see high growth potential in the business. They provide capital for a startup or for the expansion of a business that cannot directly access the stock market for public funding. This investment is done in exchange for an equity stake in the company.

Venture capitalists take a calculated risk by investing in companies with unproven histories but high growth potentials. Their investment may sometimes fail but when their calculation is correct, it may result in huge profits when the company expands.

Who is an Angel Investor?

An angel investor is an individual with a high net worth who helps a startup with initial funds for the business. Angel investors are known by many different names, including angel funders, private investors, or seed investors. The financial help from an angel investor is normally backed by a promise of return of capital or owners’ equity.

It is normally noted that angel investors come from family, friends, or the close circle of the entrepreneur behind the startup. However, there are quite a number of platforms that now provides the general public an opportunity to be an angel investor for a startup or small firm through them.