If you are thinking about starting or growing a business, one of the toughest challenges you will face is securing funding for the project. Various sources of funding are available, from government grants to Business Angels (BAs). BAs are individuals who invest in high-growth business in return for equity, typically 20 to 49 per cent of the business depending on the investment. Don’t be fooled into thinking that will mean giving up control of your business. Angels are generally not looking to run the firm, they want you to do it and they can offer support in return for a minority stake.
Some BAs invest on their own, whereas others do so as part of a network, syndicate or investment club. In addition to money, they often make their skills, experience and contacts available to the company.
What they want
You need to make your proposal as attractive as possible to the BAs, if you want them to invest. They will look for a certain amount of expertise from the manager or owner of the business and might also look for a good track record in the field.
The business needs to have a competitive edge and the potential to grow in its intended market. ‘Business Angels look for companies with a unique selling point, niche businesses that are scaleable,’ says Anthony Clarke, chairman of the British Business Angels Association (BBAA). Compatibility between the management and the Business Angel’s skills is also a bonus, and often, BAs will look for a certain amount of financial investment from the entrepreneur to show commitment.
The typical investment from an Angel is between £10,000 and £750,000 and the potential for a high return is top of their agenda. However, they are generally not averse to risk and ‘can invest as low as £1000 in ‘seed’ or start-up companies,’ confirms Clarke, but you might find that strict conditions are imposed at this level.