For the entrepreneur, angel financing often provides the critical first funds needed to attract key employees and to develop a technology or a product to the point of commercialization or to a stage where more significant venture capital funding becomes available.
Angels operate in a number of ways, sometimes through groups of pooled funds or individually.
Angels are even available now through Internet links and networks. Typically, angel investors are those individuals who know the entrepreneur from a family or business relationship or understand the business, either through the angel's own business experience or through prior investments. Over the past several years, liberalization of certain securities laws and the stock market boom have resulted in increasing levels of angel financing. In the past, investors had to wait two years or more following their investment before they could resell under Rule 144. Some angels ask for preferred stock, with certain rights and liquidation preferences over the common stock.