Explain why the scenario below is not a description of an angel investor. Situation: Ray has an idea for developing an app and finds individuals who will invest in the app. These individuals sign an agreement that they expect no money or rights in the app.

Correct Answer:

This is not a true example of an angel investor because angel investors usually provide money in exchange for something of value, such as partial ownership, future repayment, or rights connected to the app. In this situation, the individuals expect no money back and no rights in the app, which makes them more like donors or supporters than investors. An angel investor takes a financial risk with the expectation of a return or stake in the business.