What are Business Angels?

Business Angels are private individuals who invest on their own or sometimes as part of a syndicate for larger amounts. They rarely have a connection with the company before they invest but often have experience of its industry or sector.

The principal issues usually considered by business angels are:

  • The expertise and track record of the founders and management,
  • Defensible IP
  • The competitive edge, value proposition(s) and unique buying points,
  • Realism of financials, time and cost to market
  • The characteristics and growth potential of the market,
  • The up-side potential of the business angel’s investment,
  • The complementary fit between the management, business proposal and the business angel’s skills and investment preferences,
  • The financial commitment of the entrepreneur.

In addition to money, business angels often make their own skills, experience and contacts available to help the company. The commitment of many business angels is very strong. Business angel investment is regarded as high risk but if the company succeeds everyone benefits. Rewards can be substantial, but if the company fails, the business angel must be prepared to lose some or all of the investment.

Business angel finance usually operates at a much earlier stage than many private equity firms can invest, can draw in co-investment funds held by government and Local Authorities, or a mix of angel and debt finance.

Business angels are a vital but still under-utilised source of money for new and growing businesses. A typical business angel may make one or two investments in a two-year period, either individually or by linking up with others to form a syndicate. But some wealthier business angels invest much more frequently.

Business angels typically invest between £20,000 and £500,000 in an investment. Where larger amounts are invested in a business, this maybe as part of a syndicate organised through personal contacts or a business angel network.

Business angels invest across most industry sectors and stages of business development, but especially in early and expansion stage businesses in high growth potential market sectors.

 


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