An angel investor is called such because the term originated from the Broadway theatrical world.
The Origin of "Angel Investor"
The term "angel investor" wasn't always associated with startups and high-growth companies. Its roots lie in the world of theater.
Broadway's Early Angels
- Financing Plays: In the early days of Broadway, theatrical productions often relied on wealthy individuals for funding.
- Informal Lending: These individuals weren't formal lenders but provided capital to bring plays to life.
- Payment Contingency: Crucially, these investors were only repaid if the play became a success. As the provided reference states, "plays were often financed by wealthy individuals rather than formal lenders, and payments were due only when and if the production was a success." (01-Oct-2024)
Why "Angel"?
These benefactors were dubbed "angels" because they swooped in to provide crucial funding, often when traditional financing wasn't available, thus "saving" the production. The term has since been adopted by the venture capital community to describe individuals who provide seed money to startups.
