What are business angel investors?

Business angel investors are usually extremely wealthy individuals who invest in new startup businesses or companies looking to expand in return for equity in the business. Business angels quite often operate on their own, but also occasionally work in large conglomerates or an investment syndicate to either share the risk of investment or to combine funds for a large scale investment.

Who are business angel investors?

Most typically, business angels have already made their money through their own business ventures and are now looking for opportunities to invest in other businesses to get a return on their own capital. Statistics say that most business angels are men and aged between 40 and 60. With the expansion of the technology industry, specifically the Internet, those statistics are without doubt subject to change. Surprising enough, 40% of all business angel investments are lost due to business failure. Therefore it isn’t uncommon to see many venture investors sharing the risk with other angel investors rather than chasing high returns which, statistically have depleted chances of coming to fruition.

What can they offer small business startups?

Venture investors can usually provide an instant injection of capital for a small business startup. Business angels are an obvious alternative to bank loans or friend/family investment. They are most commonly associated with being a source of equity finance, in other words they retain a stake in your business in exchange for the capital injection.

How much finance do venture investors typically offer?

The amount that business angel investors invest in your business will of course differ depending on your situation. No two situations are the same in the business angel game. Typically, investments ranging from £10k to £250k are most common. Quite often as previously discussed, the higher the investment, usually the more investors that are involved in the funding of the deal. Larger investments (£100k plus) typically take place through syndicates.

What else are business angel investors useful for?

It should be stressed that business angels aren’t just cash injection providers, they can usually offer unrivalled business experience or provide lucrative contacts within specific industries that can either expedite product/brand development or bypass various channels. (I.e. expedite market entry, provide direct access to suppliers/brands etc).

In part two of this article, we will look at how you can find business angel investors and how to secure a deal with them - Don’t miss it! [Part Two is now available. Follow straight on from this article here: Finding Business Angel Investors for Startup Business Finance.]