Digital Ventures

What are Business Angels?

Business Angels are high net worth individuals who invest on their own, or as part of a syndicate, in high growth businesses. In addition to money, business angels often make their own skills, experience and contacts available to the company.

Business Angels rarely have a connection with the company before they invest but often have experience of its industry or sector. The commitment of business angels is often very strong.

The majority of Business Angels make investments for financial reasons. However, there are also other motives for investment, for example, taking an active part in the entrepreneurial process, and the enjoyment from being part of the success of a good investment and the sense of putting something back in.

Business angels are an important but still under-utilised source of money for new and growing businesses. A typical business angel makes one or two investments in a three-year period, either individually or by linking up with others to form a syndicate. Some business angels invest more frequently.

Are Business Angels for you?

Business angels invest between £10,000 and £750,000 in an investment. Where larger amounts are invested in a business, this may be’ as part of a syndicate organised through personal contacts or a business angel network. The lead investor is sometimes referred to as the “archangel”.

Business angels invest across most industry sectors and stages of business development, but especially in early and expansion stage businesses. Most prefer to invest in companies within 100 miles of where they live or work. Investors in technology companies tend to be more prepared to travel longer distances.

What do Business Angels look for?

The methods used by Business Angels to decide which businesses to invest in varies greatly, however, the following issues are all taken into consideration:
– The expertise and track record of the founders and management
– The businesses competitive edge or unique selling point
– The characteristics and growth potential of the market
– Compatibility between the management, business proposal and the business angel’s skills and investment preferences
– The financial commitment of the entrepreneur

What to look for in Business Angels?

The company must also ensure that the business angel willing to invest in them is right for their company. Before signing an agreement the business must ensure that:
– Business Angel’s skills match the companies needs
– The management team and the business angel are compatible and will be able to work together.