What type of investor is an angel investor?

An angel investor is defined as a wealthy private individual who provides capital to startups, typically in exchange for equity ownership. This type of investor is often crucial in the early stages of a company's development, offering not just financial support but also mentorship and advice, leveraging their experience and networks to help the business grow. Angel investors play an important role in fostering innovation and entrepreneurship, as they are willing to take higher risks on new ventures that might not yet qualify for traditional financing methods like bank loans or venture capital.

In contrast, the other options describe different types of funding sources. Government entities usually provide loans rather than direct equity investments, institutional investors manage larger portfolios and tend to invest in more established companies, and banks typically focus on lending capital with an expectation of repayment rather than taking equity stakes in businesses. Therefore, the classification of an angel investor as a wealthy private investor funding startups for equity accurately reflects their role in the investment landscape.