A more personal form of funding, business angels are high net worth individuals investing their own disposable finance in a cause worthy to them. Acting on their own or in a syndicate, they can also bring valuable experience and guidance to a growing business.
Angels seek opportunity
Business angels look for investment opportunities where companies are showing the potential for growth. They provide financial backing to start-ups and early stage businesses as well as to established businesses looking for expansion capital.
Angels will often facilitate a high-risk investment where the potential for an excellent return is clear.
Is it worth losing equity in my business?
Angel investing is a form of equity finance, so in exchange for much-needed funds, you give up equity or shares in your business. But angel investors are more than just money.
Most angels can offer invaluable, first-hand experience of early-stage and growing businesses. This knowledge and skill set, coupled with their network of contacts, could transform your journey and help you to grow at a faster rate.
Is a business angel right for me?
An angel investor is likely to take a very hands-on approach to supporting your business, assuming an active role in decision-making as well as providing the finance. This can be invaluable to some businesses but a rude awakening to others.
Pros
- Angels can invest for the long-term, often in multiple rounds
- Angel finance is accessible and quick without complex assessments
- Angel investors are willing to take on high risk financing
- Angels bring a wealth of knowledge and experience
Cons
- Finding the right angel can be time-consuming
- The money isn’t a loan, you’ll lose equity shares in your business
- The expected rate of return can be high in a short space of time
- You will need to be open to external input into the day-to-day running of your business
Key points to consider
- Business angels often invest between £10,000 and £500,000 in a single venture
- Angel syndication can raise this to deals of up to £2m
- A return on investment is expected over a period of 3-8 years
- Angel investment can work alongside other sources of finance to boost the pot
- There are costs associated with securing angel finance
- You need an exit plan in place for the angel, allowing them to leave the business
“I was the lead-in investor and required additional funding to complete the acquisition. Some of this was found from within the client’s existing senior management team, and Pegasus obtained the additional £100,000 required via two investors from its Business Angel network. I recommend Pegasus.”