What is an Informal Investor?

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What is an informal investor? Answering this question in the category of finance is the focus of this piece. Most of us understand what it is to invest, but informal investing is a different term.

The Basics

Informal investing has been referred to using a multitude of different terms. Angel investor, venture capitalist, shark, informal investor – these terms all refer to the same general concept. This type of investor works in the area of financing startups, or fledgling businesses that are still in the process of creation.

In many cases, a new business begins simply as an entrepreneurial vision. This vision is full of promise and great ideas but often empty when it comes to funding to power its fruition. Enter the informal, or angel investor.

This investor will enter the scene and step up to provide the precious funding so terribly needed in order for this new startup to get off the ground. This can be done purely out of good will or the belief in a product or a concept that it enforces. Most of the time though, there is an underlying business deal that provides incentives for these investors to step up to the task. These can and often do include the rights to predetermined portions of future profits, ownership, or other assets. Through some sort of incentive, investors are drawn to the great risk associated with investing in an unproven startup.

Real-Life Examples

Individual cases of informal investment can sometimes be difficult to isolate and thus report on. However, we can certainly point to several popular venues in which this type of investing is a common occurrence. In fact, these venues are exclusively built around the concept. Here are a few:


Kickstarter is an online market and meeting place for all kinds of startups and personal endeavors alike. All of these endeavors are called “projects” within the site and are made available for searching and browsing in a number of ways. Virtually anyone can act as an informal investor here, providing various amounts of funding to whatever projects suit their interests. In return, project owners offer some sort of financial or goods-based incentives at completion time.

Shark Tank

Shark Tank is a popular television show in which six, wealthy, informal investors provide their investment services to startups and other dream-filled entrepreneurs that come on the show. Their is a catch; however, the investors must be impressed sufficiently with the concept being pitched as well as the individuals behind it and a chance for solid, future returns on the investment. This is an extremely popular television show that showcases informal investing for all to see.

Related Resource: Small Business Advisor

Informal investing is all about calculated reward and a gift of life for an emerging business or idea. It also involves substantial risk however, which is the reason behind the incentives often seen attached to these financial generosities. This is the world of the informal investor as well as a few of the places we can see these particular investors at work.

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