Equity investors only get returns through selling shares or dividends. As an early investor you prefer the company reinvest all profits (if any) into growing the business. Therefore, your return ONLY comes from selling shares. Angels tend to be wealthy and experienced investors. This allows them to be patient with their investments.

Early investors see the potential for a company before others. Most of its value lies in the future and its not tested yet. Products have to be made, code has to be written, employees hired, distribution deals signed, supply chains made, etc.

Angel investing is akin to flipping homes, you buy cheap homes, renovate them and then sell for a profit. You won't see cash until you sell the property.

As the company grows and gains more experience, more investors become interested and want a piece of the pie. The early investor could sell shares at this point, getting bought out, but they lose out on future earnings.

Angels are looking for returns multiples higher than their investment.

Why? Most startups fail.

If you have ten portfolio companies, chances are 7 will fail, 2 net a decent return and 1 becomes a hit.

Angel investors have to be willing to take huge risks and able to absorb losses.