How is the term 'angel investor' defined?

The term 'angel investor' is defined as an individual who provides financial support to startups in exchange for ownership equity or convertible debt. This definition captures the essence of what angel investors do: they typically invest their own personal funds into early-stage companies, often during the critical phase where traditional financing avenues might not be available. In return for their investment, they receive equity stakes in the company, which gives them a vested interest in the success of the business.

Angel investors not only provide capital but often come with valuable industry experience and connections, which can further help the startup in its growth trajectory. Their investment is crucial for many entrepreneurs seeking to launch their business ideas, as it can provide the necessary resources to develop products, hire staff, and establish a market presence.

Other options describe different funding mechanisms. For instance, mentorship-focused support does not involve direct financial backing, while corporate entities generally engage in larger funding projects and government grants typically do not require the same equity exchange and are structured differently. Therefore, B distinctly highlights the financial investment aspect combined with ownership stakes, making it the correct definition of an angel investor.