Quick answer
An angel investor is an individual who invests personal money in an early-stage or growing business, often in exchange for shares, a convertible instrument or another negotiated right. Angels may also bring advice and introductions, but the founder should verify the investor, understand the terms and avoid paying an upfront ‘release fee’ to receive funding.
Founder planning helper
What percentage could an investment buy?
This simple maths tool shows ownership before other terms, option pools, preferences or future dilution are negotiated.
What angel investment means
Angel investors usually invest before a company is large enough for institutional private equity or a conventional bank loan. They may invest because they understand a sector, believe in the founder, want a financial return or can add useful experience and connections. In Nigeria, an angel deal can be local, diaspora-led or cross-border, so the legal and tax structure deserves attention.
The investor is not just a source of cash. They may ask for a percentage of the company, a board or advisory role, information rights, vetoes over important decisions or a right to invest in later rounds. Ask what the relationship will look like after the money enters the business.
What Nigerian founders should prepare
Prepare a short pitch that explains the problem, customer, solution, traction, revenue model, market, competition, team, funding request and use of funds. Keep the numbers consistent across the deck, bank statements, management accounts and any financial model.
Also prepare incorporation and ownership documents, major contracts, tax records where available, evidence of customer demand, product or service metrics and a realistic plan for the next 12 to 18 months. A founder who can answer how each naira will create progress is easier to assess than one who only presents a large market size.
Equity, convertible money and loans
An equity investment gives the investor shares or ownership after agreed terms. A convertible instrument may start as debt or another form of claim and convert into shares later, often at a discount or valuation cap. A loan preserves ownership but has repayment and interest obligations. The names sound familiar, but the documents control the actual rights.
Ask about valuation, dilution, conversion trigger, interest, maturity, liquidation preference, information rights, founder vesting, reserved decisions and future rounds. Use a lawyer who understands Nigerian company and investment documents before signing a term that affects ownership or control.
How to find and verify an angel investor
Start with founder communities, accelerators, sector networks, investor introductions, professional associations and credible startup events. Ask for references from founders the investor has backed and verify that the person or vehicle exists. An investor who refuses basic due diligence should not receive your confidential records.
Be suspicious of anyone who promises a guaranteed investment, asks you to pay tax or legal fees into a personal account before releasing funds, requests your banking password or pressures you to sign a blank document. Legitimate costs should be documented and independently verifiable.
How much should a founder raise?
Raise enough to reach a meaningful milestone, not simply the largest number an investor might offer. Define the milestone in measurable terms: customers, revenue, regulatory approval, product launch, gross margin or a repeatable sales process. Then estimate people, equipment, technology, compliance and working capital costs.
Model a base case and a slower case. Nigerian businesses may face exchange-rate movements, power costs, import delays, customer payment delays and changing regulation. A plan that survives uncertainty is more credible than a forecast that assumes every month goes perfectly.
The term-sheet conversation
The percentage is only one term. Discuss valuation basis, investor rights, board involvement, reporting, founder role, future funding, transfer restrictions, exit expectations, dispute resolution and what happens if targets are missed. Put the agreed commercial points in writing before spending time on final documents.
Keep the company and personal finances separate, issue shares through the proper corporate process and record approvals. If the investment is cross-border or uses a special-purpose vehicle, take tax and legal advice on the structure rather than copying a foreign template.
People also ask
What does an angel investor do?
An angel investor provides personal capital to an early-stage business, usually for equity or another negotiated right, and may also bring advice and connections.
How do I find angel investors in Nigeria?
Use credible founder networks, accelerators, industry communities and warm introductions, then verify the investor and speak with founders they have backed.
Do angel investors ask for repayment?
Equity is not a normal loan repayment, but a convertible instrument or loan can have repayment or conversion terms. Read the documents.
How much equity should I give an angel investor?
There is no universal percentage. Compare valuation, investment amount, rights, dilution, future funding and the value the investor brings.
Can an angel investor ask for an upfront fee?
Treat an upfront payment request or guaranteed funding promise as a major warning sign. Verify every professional cost independently.
Do I need a lawyer for angel funding?
Professional legal and financial review is strongly advisable before signing documents that affect company ownership or control.
Official links and update policy
Portal availability, deadlines, fees, channel line-ups, financial rules and product terms can change. Open the official source before applying, paying, submitting personal information or relying on a current price. Explainer.NG explains the process but does not run the portal or represent the organisation.