4.3
(26)

BUSINESS ANGEL

Accelerate your business with these expert tips from Business Angel experts - take a look and discover this TIP!

A Business Angel is that a natural or legal person who provides funding and/or expertise to new entrepreneurs in their early stages with a view to making a future profit. Es an individual investor or group of investors who invest their money and time in startups and early stage companies. These investors are interested in providing capital and support to companies with high growth potential and an opportunity for significant profitability. In addition to their financial investment, Business Angels, often bring their experience and knowledge of the sector, helping entrepreneurs to grow and develop their business. (see TIP provided by a business angel (+)).

Business Angels typically invest in startups in the early stages, when the risk is higher but also the opportunity for higher returns is greater. They are not looking to stay in the company as shareholders, they are not looking to receive dividends or a position in the company... they are looking to sell their stake within a period of time and, multiplying by 10, the money contributed.

For seed stage startups, they are an excellent alternative source of funding to traditional startup funding, providing between ¤5,000 and ¤1 million. (see TIP average ticket (see+)) in exchange for a % in the startup's capital (see+) which can range from 5-15%. In deciding whether a startup is investable, they like to meet the entrepreneur in an PITCH (see+) for more information, see the INVESTOR DECK (see+) and analyse the scalability (+) y exit (+). (See also this TIP). Nearly two-thirds of respondents invest across the country, not just in their immediate local area, and the proportion of those active internationally is consolidating at around 27%, a very similar percentage to the 30% in 2019. . 

CHARACTERISTICS OF A BUSINESS ANGEL

  • They invest their own money, unlike Venture Capital firms that invest third party money.
  • They make their own investment decisions.
  • They invest in companies with whose promoters they are not related or friends.
  • They seek to make money, although this is not their only motivation for investing.

THE PROFILE OF A BUSINESS ANGEL

Most business angels have the profile of a senior manager, founder or CEO of an established company and, to a lesser extent, start-up founders:

  • Technology, healthcare, banking and finance remain the sectors from which investors most often come.

The average ticket that a business angel invests in a start-up is clearly below €25,000. This forces entrepreneurs to articulate operations with a greater number of investors while facilitating their diversification. Business angels They usually spend less than five days a month on their investments and most of them only provide strategic advice, as only 21% are present on the boards of startups.

SOME OF THE DEFINING CHARACTERISTICS OF A GOOD BUSINESS ANGEL ARE:

  • Business experience: a business angel should have entrepreneurial experience and be aware of the challenges faced by early-stage start-ups.
  • Networking: A wide network of contacts and relationships can be very useful for startups, and is one of the characteristics that business angels tend to look for.
  • Knowledge of the market: a business angel must have a thorough knowledge of the market and trends in his or her sector of interest.
  • Risk mentality: business angels must be willing to take risks and invest in start-ups that may not be profitable in the short term.
  • Decision-making capacity: A business angel must be able to make quick decisions and be willing to act decisively in the startups he or she invests in.
  • Value contribution: In addition to providing capital, a business angel must be willing to add value to the startup through his or her experience, knowledge and network of contacts.

HOW TO FIND A GOOD BUSINESS ANGELS?

Investors look for and find opportunities to invest in their closest references, in the entrepreneurs themselves and in the business angels networks and in the invest day organised by accelerators such as mentorDay (see+).

  1. Accelerators (+) and programmes of incubation (+): Many accelerators and incubation programmes have established relationships with business angels and can provide introductions. 
  2. Networking (+): where it is easy to connect with potential business angels. 
  3. Entrepreneurship events and fairs: attend events and fairs in your area where entrepreneurs and investors meet.
  4. Social networks (+) and online platforms: there are many online platforms and social media groups where entrepreneurs and business angels connect.
  5. Investment clubs: investment clubs are groups of private investors who invest together in start-ups.

At this TIP (see+) you can identify where to present your startup to contact business angels.

ORIGIN OF THE TERM BUSINESS ANGEL

The term "business angel has its origins in the American theatre of the 1920s and 1930s, where "theatre angels" were business people living in Los Angeles in the United States who financed theatrical productions and thus helped them to be realised. There is a tendency to confusing the word "angel" comes from Christian mythology, where angels were celestial beings who helped and protected people on earth. Many times business angels are compared to angels because they provide crucial help in difficult times and provide an opportunity for startups to reach their potential and succeed... but, really, The origin of the money is Los Angeles businessmen who financed Hollywood actors.

CLASSIFICATION OF BUSINESS ANGELS:

BUSINESS ANGELS CAN BE CLASSIFIED ACCORDING TO DIFFERENT CRITERIA, FOR EXAMPLE:
  1. Duties performed: Some business angels are more active and play a more proactive role in the management and direction of the company, while others prefer a more passive role, providing only capital and expertise.
  2. Amounts invested: Another classification criterion is the amount of money they invest, which can vary from a few thousand to several million dollars.
  3. Sector of interest: Some business angels have a preference for investing in certain sectors, such as technology, biotechnology or real estate, while others are open to investing in any interesting opportunity.
  4. Risk profile: Finally, some business angels are more risk-taking than others, and are willing to invest in start-ups with high growth potential but greater uncertainty.

DIFFERENCES BETWEEN A BUSINESS ANGEL AND A FOOLS INVESTOR (FFF)

The investor Fools (+) is a "madman". who invests in a non-professional way and is not dedicated to it, the Business Angel is a professional who dedicates part of his time and with a methodology. Business angels and FFF investors (family, friends and folls) may appear similar in that they both invest in start-ups, but there are some key differences.

DIFFERENCES:

  1. Experience and knowledge: Business angels usually have extensive experience in the business world and a deep knowledge of the market and trends. In contrast, FFF investors can be simple savers or friends and family who want to help the entrepreneur, without necessarily having experience or knowledge of the sector.
  2. Amount of investment: business angels tend to invest significant amounts of money compared to FFF investors, who often invest smaller amounts.
  3. Demand and commitment: business angels tend to be more demanding and committed to the project, and expect a return in the short to medium term. On the other hand, FFF investors may be willing to wait longer to recoup their investment and are less interested in a quick return.
  4. Advice and support: Business angels typically provide advice and support at both the strategic and operational levels, and can have a strong influence on the direction of the company. FFF investors, on the other hand, may have a more passive role in the company.

Business angels are professional investors who seek to invest in startups with high growth potential and expect a return in the short to medium term, while FFF investors are simple savers or friends and family who invest in a company in which they have a personal or emotional relationship. The term "FFF" stands for "Friends, Family, and Fools"; (see+ TIP) which refers to a group of people who are often the first to invest in an early stage company, before the company is mature enough to attract professional investors. 

These investors are usually close friends, family members or simple acquaintances of the entrepreneur or founder, and often have a personal or emotional relationship with the entrepreneur or the company. FFF investors often invest in an early stage company in the hope of a long-term financial return, but also, may be willing to invest without expecting an immediate return and support the entrepreneur on his or her way to success. Compared to business angels, FFF investors tend to have a lower risk profile and may be more likely to invest in early stage companies where they have a personal relationship. However, it also they may have less investment experience and fewer financial resources to invest compared to business angels.

What is the difference between a traditional investor and a business angel?

The main difference between a traditional investor and a business angel is the approach and the amount of capital they invest. Traditional investors tend to look for larger, safer investments, while the business angels invest in startups with higher growth potential and high risk.  In addition, business angels tend to be involved in the management and direction of the company, providing support and advice, whereas traditional investors tend to be more passive.

FIRST EVER BUSINESS ANGEL

Isabella the Catholic, Queen of Castile and Leon, is known as one of the most influential figures in the history of Spain during the 15th century. She was arguably the first "business angel" in history, as the term "business angel" is a modern notion because during her reign, Isabella proved to be an astute and determined leader, who supported the country's trade and economy through political and financial measures. For example, she founded the Casa de Contratación in Seville, which became an important centre for trade with the Spanish colonies in America. In addition, he supported and invested in Christopher Columbus' expedition and the expansion of the Spanish trade route across the Atlantic.

APPLY THIS TIP TO YOUR PROJECT

THINK ABOUT YOU

THINK ABOUT HELPING OTHERS

Rate this TIP!

Click on the stars to rate

Rating "26" - Average " - Average4.3"

No votes yet, be the first to vote!

We are sorry you did not find it useful.

Help us improve this TIP!

Leave us a comment and tell us how you would improve this TIP