Why a business angel could be a good solution to help you grow your business
Business angels are a good source of risk capital for small businesses and are known for ‘taking a chance’, if there’s good chemistry and they like the idea. As well as money, they may also have some knowledge of your type of business, or possess skills which can be very useful. In return for a share in the business, they will plough in money at their own risk.
They can operate very quickly, often making decisions in days or weeks. However, these real-life Dragons tend to take a little longer than just one meeting to make a decision, but generally ask for less equity than those on the aforementioned TV programme.
Key facts about business angels
Tracking down business angels used to a hard task, however today there are networks and organisations dedicated to bringing them into contact with entrepreneurs. The UK Business Angels Association will be able to help you track down some for your area of sector.
Many angels are prepared to take big risks when investing, expecting to lose on some investments but hoping to recoup all losses and make a profit on other deals. However, they are not foolhardy and are looking for winners.
Compared to Venture Capitalists they conduct less research into prospective investments and may offer better terms. They are also likely to offer funding at a much earlier stage.
Many have worked in a small firm or owned their own business before, so they know the small business world well.
Business angels are independently wealthy and tend to be towards the older end of the demographic.
They tend to invest sums of between £10,000 and £100,000 but will club together for bigger deals.
Business angels are much more likely to invest in early-stage investments, where relatively small amounts of money are needed. They are far more likely to invest in start-ups and early-stage investments than venture-capital providers.
Many prefer to invest in businesses which are in the region where they live or operate or which is easy to travel to.
Some want to offer their expertise, network and contacts as part of the deal. Others are content to take a back seat and let you get on with it.