Final answer:
A group of companies or individuals that invests in businesses for ownership and potential profits are called venture capitalists, who carefully monitor their investments, unlike angel investors who often support early-stage businesses.
Step-by-step explanation:
A group of companies or individuals that invests money in new or expanding businesses for ownership and potential profits is known as venture capitalists. Unlike issuing bonds or borrowing which requires a company to make interest payments, if a company issues stock, it does not have to make payments to investors. Venture capitalists provide an alternative by investing their own money into the firm, often earning a substantial ownership stake and thus have a vested interest in the success of the business they invest in. This allows them to closely monitor the management and strategy of the company, which aids in mitigating the issue of imperfect information that regular shareholders might face.
Angel investors are a specific type of investor who typically provide funding for small new companies at an early stage of development in exchange for owning some portion of the firm. This funding source is critical for small businesses that may not have access to other types of financing and can help propel a business from an idea to reality.