What are business angels?
- Business angels are typically wealthy entrepreneurs that look to invest in growth companies for equity.
- The angels will consider the growth potential and characteristics of the market that you are in.
- They will look at the track record and expertise of your management team.
- They might visit your company and carry out due diligence. This will happen before any investment takes place, and they will determine the exit period, which is typically between three and five years.
- Angels will look for a 25% growth on their capital each year.
What do they offer?
- They will help finance growth.
- They predominantly look for a good return and will take risks if they think the potential return is good enough.
- They tend to make a quick decision whether to invest or not.
- They will look to be closely involved in your business’ direction.
- They will have expert knowledge on how small companies work and may have some local knowledge.
- They can help with:
- financial advice
- new contacts
- market information
- management advice
- contract negotiations
- guidance on business strategy
- They tend to cost less than other types of equity finance, including venture capitalists.
What could you be giving up?
- Over 90% of applications are rejected after a business plan is submitted.
- It can be difficult to find one as they do not make regular investments.
- The long process of getting a business angel on board is time taken out of your own business.
- Business angels will want to see regular accounts and financial reports, as they will also be closely involved with your business strategy.
- They may look for perks such as strong dividends and voting rights.