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BUSINESS ANGELS / INFORMAL INVESTORS |
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> The truth about informal investors or business angels |
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Informal investors, or business angels, are wealthy, entrepreneurial
individuals who look to invest in new and growing businesses in return for a
share of the equity. They usually have considerable experience of running
businesses which they can place at the advantage of the companies in which
they invest. Business angels invest at all stages of business development,
but predominantly in start up and early stage businesses. The majority of
them tend to invest in businesses located within a reasonable distance of
where they live.
Advantages of Business Angel finance
Unlike the banks, business angels do not require security. This makes them
particularly valuable to those businesses with few assets other than
intellectual capital. Most business angels make investments of £100,000 or
less, unlike venture capital companies who tend not to make investments much
below £500,000. Because of their business background, many can bring
valuable skills to the businesses in which they invest.
Is informal investment right for my business?
Before deciding whether your business is likely to be appropriate for this
type of investment there are a number of questions you need to ask yourself:
-are you looking to raise between £10,000 and £100,000?
-are you prepared to give up some of the equity in your business and allow
an investor to take a 'hands-on' role?
-does your business have potential to grow sufficiently over the next few
years to provide the business angel with a return on investment?
-can you offer the business angel an 'exit' (eg through a trade sale or the
repurchase of their equity stake) at some future date?
How to find a Business Angel
Professional advisers such as accountants and solicitors can sometimes point
people towards a business angel, as can bank managers. There are also a
number of business angel networks (BANs) which act as introduction agencies
bringing together entrepreneurs seeking an investment with potential
investors. The British Venture Capital Association (BVCA) publishes 'Sources
of Business Angel Capital' which gives details of local BANs.
The National Business Angels Network (NBAN) has been established to provide
a national conduit through which any company seeking investment can be put
in touch with BANs, individual investors registered with NBAN and business
support organisations which can help businesses to become more 'investment
ready'.
What a Business Angel will look for in a business proposition
Business angels will look at a number of factors when making an investment
decision. They will include the expertise and track record of the
entrepreneur and management team; the uniqueness or competitive edge of the
product or service; the market in which the business will operate; the
likely return on any investment; what financial commitment the entrepreneur
and any partners have made to the business and the industry and location in
which the business will operate.
What to look for in a Business Angel
It is sensible to choose someone who you feel you will be able to work with,
and who will be able to work with you, particularly if they will be taking a
'hands-on' role in your business. You should also consider if, in addition
to their investment, they will be able to bring particular skills which
could be of use to the business. You should also ask them for details of
their previous investment experience and, where possible, speak to other
businesses in which they have made investments.
Further Information
Try contacting the British Venture Capital Association (BVCA) who produce
'Sources of Business Angel Capital' and list 48 business angel networks
operated by a variety of different organisations and located BANs, or the
National Business Angels Network (NBAN). |
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