‘Business Angel’ is the common name for wealthy private individuals who invest in small and medium-sized businesses. These types of investors fund startup ventures in the hope of making a significant return on investment!
Business Angels usually have some business experience and want to use their knowledge and expertise to find an opportunity others have missed. Seeing a good opportunity in its early stage makes it relatively cheap to get on board.
Key Takeaways:
- Business angels are usually experienced business people who aren’t scared to take a gamble by investing in a product or company that banks consider a high-risk investment.
- These types of entrepreneurs usually invest in higher-risk, higher-reward business opportunities.
- Investing in a startup that no one believes involves an element of fun, excitement, and challenge.
- If you have a good business idea but you not have funds or can’t get loan approval, then business angels can make things possible.
- As a founder, you can assemble a group of angels to invest in your business to put together the funding you need while spreading the risk for them.
Why Business Angels Invest
The main reasons are:
- They have seen a good opportunity to make a big investment return and be part of a very profitable future business venture.
- A company fits their interests or experience, and they want to be part of it.
- They feel they can contribute to the company by adding value through advice, contacts, and money.
- These types of investments involve an element of fun, excitement, and challenge.
- A company is based locally, and they want to see in real-time how it grows
- Sometimes angels retire with a large payoff in their former career and now are looking to create an investment and a job for themselves.
Which Business is Suitable to Search Funding From Business Angel
This type of raising funds is suitable for startups with a good new product, established proven businesses that are looking to grow, or for troubled businesses that are being turned around.
This funding type is not generally suitable for ‘lifestyle’ businesses – if you plan to open just one shop or one restaurant, for example, as that doesn’t offer enough growth potential to give a high enough reward for the risk involved.
Businesses looking for amounts of over $2M should consider venture capital as funding sources instead of business angels.
Summary
Angels are seasoned business people who aren’t scared by the level of risk involved. They are one of the steadiest and most supportive sources of finance available to your business.
If you run into trouble, the banks will be running the other way, demanding back the money they lent you, but business angels will generally run to help you, rolling up their sleeves to do what needs to be done.
Your dream business idea can become a reality thanks to these entrepreneurs, and because of that, your task is to do everything in your power to make success that will bring profit for you and your angel!