Which of the following is a common characteristic of angel investors?

• A. They never participate in profits
• B. They require collateral
• C. They have day-to-day control
• D. They often accept a lower return on investment compared to other sources of equity capital

Answer: (D)

Angel investors are individuals who invest their own money in startups in exchange for equity, usually at the very early stages. They don’t typically require collateral and they don’t take day-to-day control of the business; they provide guidance and support instead of managing operations. What sets them apart from larger, professional equity providers is their flexibility and patience: they often accept a lower return on investment compared to other sources of equity capital because they value mentorship, the potential upside of helping a promising company grow, and the personal relationships involved. This makes the option describing a lower expected return relative to other equity sources the best fit, even though they still seek meaningful upside if the company succeeds.