Angel finance can be a flexible way to fund expansion projects without the long processes associated with ‘conventional’ borrowing
Business angels are private individuals who invest in companies, typically start-up companies, or those ready for growth. Generally of high net worth, angel investors provide a valuable an alternative source of finance to companies who are unable to secure traditional lines of finance.
Companies seeking finance for growth also benefit from an angel’s business acumen and expertise. The majority of these investors have a long track record of running successful businesses themselves, or have been highly-paid executives within the corporate world keen to share their business acumen and contacts, which often makes this type of funding the best option.
What are the likely goals of business angels?
Many act as mentors for the company, and have considerable input and desire to see the business succeed. This is often between three and eight years, with the aim being to achieve significant return on their investment.
This is generally achieved by assisting strategic decision-making, providing business contacts and general "grey haired" knowledge. Other angel financiers prefer to supply funding for equity only, and are more of a ‘sleeping partner.’
What are angel investors looking for in a company?
- A viable idea for business growth, backed up by clear plans for implementation
- A management team that they can rely on, and that are clearly inspired and enthusiastic about the long-term success of their business
- Flexibility in striking a deal that benefits both parties, but provides a clear route to the returns sought by the investor
- Angel investors are generally drawn towards companies that qualify for the Enterprise Investment Scheme (EIS and SEIS), as they offer access to significant tax reliefs
Angel finance may also be available from syndicates of two or more investors. Syndicates generally consist of investors with a similar attitude to risk, or interest in a particular industry or technology.
Further rounds of funding may be provided after the initial financial input, from both individuals and groups of investors or from more traditional sources of finance which by now may be available.