Private equity

Angel finance is a term used to describe what happens when individuals (“business angels”) or groups of angels (often known as a syndicate) invest their own money in a business in return for shares.

Angels back high-risk opportunities, with the potential for high returns. The deeper pocketed angels can invest upwards of £50,000. Some invest on their own, others through a syndicate, however, the most significant trend is for angels to invest in syndicates or groups, generally with a lead angel.

At the seed stage, lower amounts of funding may be available. Businesses in the growth stage may be able to attract higher amounts from angel syndicates.

Angels can offer multiple rounds of finance and frequently co-invest with other sources of equity and co-investment funds as further growth finance is required.

When taking on angel investment, a business should look beyond the capital they put in. Unlike venture capital or other forms of equity investment, the money invested by angels is their own personal money, which they have worked hard to earn. Therefore, angels tend to invest more than just money when they decide to invest in a growing business.

They tend to take a long-term view of their investments, helping entrepreneurs to grow their businesses over time rather than seeking a quick return.

Most angels can bring valuable first-hand experience of growing businesses, often early-stage businesses. Their skills and experience will be shared with the business, as well as their network of contacts.

Most angels focus on investments within a small geographic area, and so have local knowledge and local networks.

Angels often make investment decisions quickly, without complex assessments. However, tracking down the right angel can take time.

1. Angel investors are most often individuals rather than companies. An angel investor provides financial backing to entrepreneurs and early-stage businesses, or start-ups.
2. The capital that angels provide can be a single injection of funds or ongoing financial backing via a series of investments.
3. There are many pros and cons to angel investment. The biggest negative for many is giving up equity or shares in the company. The biggest positive is usually a combination of the cash injection with advice and valuable business connections from experienced investors.

• Celestial funding: how does angel investment work?
• Access to funding: are angels still out there?
• Top tips to consider before pitching for angel investment
• The vital role of angel investors during COVID-19
• Case study: Pip and Nut
• Case study: Exonate
• Case study: Soul Deli
• Case study: Veeqo

• You can find out more through the UK Business Angels Association.
• How to find the right financial advice