Business angel investment can provide first-time equity fundraisers with significant sums of money, and guidance from experienced entrepreneurs. If you are looking for financial input and guidance from experienced individual investors, angel finance could be for you.
Angels are usually wealthy entrepreneurs, and dealing with them is less formal than with other forms of equity finance. But they are individual personalities so are also less predictable.
As well as investing money, they can offer skills, contacts and experience, and some will fill gaps in your management team, either by offering advice or filling specific roles. Angels tend to offer smaller sums at an earlier stage than venture capitalists (VCs). This may help take the business to the point at which it is attractive to a VC firm.
The most reliable way to source angels is to contact one of the many business angel networks, which sift opportunities for their pool of investors and arrange networking events for you to present your business.
The National Business Angels Network (NBAN) at www.nban.co.uk will put you in contact with angel intermediaries.
In Brief – Angel Finance
- Between £10,000 and £2m can realistically be raised from one angel, although more has been achieved
- Sourcing angel investors might require more searching than finding venture capitalists (VCs), but private investors are more prepared to back an early stage business
- Angels may be found through industry contacts, but a more structured approach is via business angel networks
- The process is less formal than with VCs – angels often know their sector well, and so make instinctive decisions
- You are likely to have a closer involvement with your investor as they look to add value to your business
- Angels often invest smaller sums than VCs, so may suit newer businesses
- As well as funds, they may be able to offer skills, contacts and experience
- Investment occurs in most business sectors and at all stages of development
- Can be quicker and less formal than venture capital investors
- Angels invest in only a very small proportion of the investments they are presented with – more than 90 per cent of investment opportunities are rejected at the initial screening
- Many angels expect close involvement with the business they invest in, which not all businesses find desirable