From Self-Directed IRA To Startup Equity: Angel Investing 101

Published on February 11, 2026

Angel investing provides capital to an early-stage/startup company that is not publicly traded (pre-IPO). In exchange for their financial infusion, the investor receives equity in the company. This is a type of private equity funding, but with angel investing, the “angel” status can also include mentorship and business guidance. It also allows for relatively smaller sums of money to be invested compared to venture capital or some private equity funding.

Historically, angel investors were high-net-worth individuals. However, those with healthy self-directed IRAs (SDIRAs) can also use funds from their retirement account to make this investment, which is among the many alternative assets these retirement plans allow.

Why People Become Angel Investors

People become angel investors for several reasons. Some believe in a founder’s business plan and see potential for growth, scalability and success. Others are drawn to a business model that appeals to them and aligns with their interests based on what the company offers or who it serves. And many are excited by the chance to support startups that are market disruptors or creating entirely new markets, giving them the opportunity to be part of something new and exciting.

The early stage of a business’s life cycle can range from the very beginning of the founder’s vision—before any revenue is generated—to a few years in, when the company is starting to grow and has a customer base, but still needs outside funding.

I should note that angel investing carries relatively high risk since, as a startup, the company may not flourish; on the flip side, such an investment may yield strong returns if the business succeeds. Therefore, investor involvement beyond financial support—such as offering operational, industry or leadership expertise—can help the business grow and help the investor earn that equity stake.

Using A Self-Directed IRA To Make Angel Investments

Self-directed investors are used to making their own investment decisions, including conducting full due diligence before investing to reduce the risk of fraud or potential loss. As with many alternative assets allowed in self-directed retirement plans, angel investments are more long-term and relatively illiquid.

I often counsel clients to educate themselves about the industry or sector the startup is entering and to understand the founder’s short-term and long-term plans. It’s also important to look under the figurative hood to answer foundational questions such as:

Making The Investment: Steps And Considerations

Once you have the necessary insights to make the investment, you will negotiate the terms directly with the owner. This includes how much the investment will be and the equity stake that will be given in exchange. Remember that the SDIRA is the investor—not the account owner—and certain protocols must be followed for the investment to meet IRS rules.

Once the terms are worked out, the investor will send instructions and all required documentation to the self-directed IRA custodian. These documents include the custodian’s internal forms, such as the investment authorization, plus the subscription agreement between your account and the startup, the company’s operating agreement and the shareholder or investment agreement.

Another way to invest is to join an angel investor network. This is an entity that provides access to opportunities, often in specific industries (such as healthcare, technology or manufacturing), and provides a platform to connect with other investors who wish to pool resources to make investments. An SDIRA can partner with another to invest in alternative assets, and multiple account owners may have different areas of expertise to contribute to the early-stage company’s development.

Whichever way you choose to become an angel investor, my advice is always the same: Do your homework, understand the asset and work with a custodian that can guide you through the process if you need some support.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

Read the full article about investing in real estate syndications at https://www.forbes.com/councils/forbesfinancecouncil/2026/02/11/from-self-directed-ira-to-startup-equity-angel-investing-101/.

All of Raskulinecz’s Forbes Finance Council content is at https://shorturl.at/JRAgV.