Business Angel or Devil in disguise – the choice is yours!
Angels are high-net-worth individuals who invest on their own, or as part of a union, in high-growth companies. In addition to money, Business Angels often make their own skills, experience, and contacts available to the company. This has been immortalized by the show The Dragons Den, where people throw for money and also additional experience on dragons.
Angels rarely have a connection to the company before investing, but they often have experience in your industry or sector. Therefore, the commitment of Business Angels is usually very strong.
Most angels invest for financial reasons. However, there are other reasons to invest, such as being actively involved in the business process, the pleasure of being part of the success of a good investment, and the feeling of giving something back.
Angels are an important, but still underused, money source for new and growing businesses. A typical angel makes one or two investments in a three-year period, either individually or by linking up with others to form a union. Some angels invest more often. There are approximately 18,000 angel investors across the UK, with angels investing around £ 800 million a year.
It is often thought that you must be very wealthy to be an angel investor, but in fact many people invest around £ 10,000 in any company, however some angels invest much more and the money is also tied up for many years. Since an Angels would generally invest between £ 10k and £ 750k as an investment, but they are generally in exchange for shares. Therefore, most angel investors will take a portfolio approach and invest in more than one company to provide a variety of opportunities to diversify risk.
Angels often invest as part of a group called a syndicate, organized through personal contacts or one of the many angel networks. An investor will generally act as the lead investor, sometimes referred to as an “archangel,” and will act on behalf of the union.
In addition to investing money, Business Angels can also bring valuable knowledge, contacts and experience to the companies in which they invest. Investments are made in most industrial sectors and in business development stages, but especially in early stage and expansion stage companies. Most prefer to invest in companies within a 100-mile radius of where they live or work, although investors in technology companies tend to be prepared to travel longer distances.
What is the downside? The fact that the Angels have numerous investments means they aren’t always available when you need or want them. Angels can also seem like happy and wonderful people, but once they are in company, some of them take on a different personality. They may not be so happy and sometimes they may say the wrong thing, which will leave you feeling ashamed and unloved. Additionally, an angel can often require a substantial share allocation and, in certain cases, become a majority shareholder, which also has its challenges. An angel may not see the same thing as you, even when you explain it, and they might be dismissive by suggesting that they’ve seen everything before.
Getting an outside investment is a gamble, but with the right mindset and business plan and a bit of rapport, they can also be very valuable, but it’s worth considering everything from all angles before giving away large allotments of stock as soon as your angel appears.
Do your homework, know your numbers, and stick to a plan – it can only be good news when you’ve taken the time to understand your proposal at a granular level!
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