Three key considerations:
- Angel investors are most often individuals rather than companies. An angel investor provides financial backing to entrepreneurs and early stage businesses, or start-ups.
- The capital that angels provide can be a single injection of funds or ongoing financial backing via a series of investments.
- There are many pros and cons to angel investment. The biggest negative for many is giving up equity or shares in the company – but the biggest positive is usually a combination of the cash injection with advice and valuable business connections from experienced investors.
What is angel finance?
Business angels are individuals who make equity investments in businesses with growth potential, businesses in the early stages of development, or in established businesses looking for expansion capital. Angels back high-risk opportunities, with the potential for high returns.
Some invest on their own, others through an angel syndicate or club. 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. 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 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.
You can find out more through the UK Business Angels Association.
To explore the other finance options for your business, go back to the Finance Journey tool.