Business angel

Business angel is a private investor, usually former entrepreneur, who is investing his own capital in innovative start up business in order to achieve above average returns. Business angels provide capital in exchange for share in company.

Business Angels activity

Business angels are private investors who provide capital to start-up businesses in exchange for a share in the company. They typically have experience as entrepreneurs and are willing to invest in risky projects that may have difficulty obtaining funding from other sources. Business angels not only provide capital but also offer advice and connections in areas such as management, strategic planning, and company organization. Business angels often form networks to connect with companies seeking funding, but most contacts are made informally. The informal nature of the relationship between a business angel and a financed company can result in varying investment periods and conditions for each individual case.

Role of business angels in financing Small and Medium Enterprises (SME)

Business angels play an important role in financing risky projects which have difficulties with gaining capital from other sources.

Business angels besides providing capital also helps companies with advice and contacts in such fields like management, strategic planning, organization of company, suppliers etc. Business angels organise small networks in order to get in contact with companies seeking for capital, but majority of contacts are made informally.

Informal character of cooperation between business angel and financed company has impact on investment period and condition of collaboration which can be different in each case.

How to find business angel

Finding a business angel can be a challenging task, but there are several ways to go about it:

• Networking: Attend industry events, conferences, and networking groups where business angels may be present. This will give you an opportunity to meet potential investors and pitch your business idea.
• Business angel networks: Join a business angel network, which is a group of investors who pool their resources to invest in startup companies. Many of these networks have online portals where you can submit your business plan and request funding.
• Incubators and accelerators: Incubators and accelerators are organizations that help startups grow by providing mentorship, office space, and other resources. Many of them have business angel investors as partners, so it's a great way to get introduced to potential investors.
• Angel Investment Platforms: There are several online platforms that connects startups with angel investors. These platforms are a great way to reach a larger pool of potential investors, at the same time, these platforms may have different screening process in order to select only the most promising projects.
• Referral: Ask other entrepreneurs, venture capitalists, or business advisors if they know any business angels who might be interested in investing in your company.

It's important to remember that finding a business angel is not a one-time event, it takes time and persistence. Building a relationship with potential investors is important, so be prepared to make multiple pitches and follow up with potential investors.

Business angel — recommended articles

Private equity investments — Beta alpha psi — Venture capital investments — Corporate sponsor — Affinity group — Business tourism — Angel network — Corporate innovation — Executive search

References

• Maxwell, A. L., Jeffrey, S. A., & Lévesque, M. (2011). Business angel early stage decision making. Journal of Business Venturing, 26(2), 212-225.

Author: Krzysztof Nadzieja