How do business angels operate?
A business angel generally invests in pre-start-ups, start-ups, and entrepreneurs in their early growth phases. Investments usually range between €50,000 and €250,000 in the form of a loan or in exchange for ownership equity. Business angels operate as individuals, in networks or in funds.
Business angels like these invest on their own behalf. They are wealthy individuals who tend to regularly invest in entrepreneurial ventures with their own money in sums typically ranging from at least $25,000 to over $1 million, and sometimes even more.
Business angels that are part of an angel network can invest individually. However, they have the added advantage of working collectively in the screening process and reviewing deals, and having the option of investing in new ventures together.
In the Netherlands there are a number of angel networks that are united through the networking organization Business Angels Networks (BAN) Netherlands.
In an Angel Fund, business angels pull their resources together but act as one investor. This means they decide as a whole on each investment; no individual investments are made. By doing so, each venture that receives funding will receive a much larger sum. Being able to pull capital resources together is beneficial because it prevents the entrepreneur from needing to seek further outside financing from other sources such as venture capitalists. This ensures that angel investors will reap a greater return on their investment.
More than just money
Business angels bring a lot more to the table than just money. They also have expertise and experience that they're willing to share, as well as access to their personal network. Their involvement is often hands-on, especially during the early stages of starting a business. The more stable the business becomes, the less a business angel involves him/herself in its day-to-day operations.
Where can I find a business angel?
Business angels generally don't walk around flaunting their venture capital. The best way to find a business angel is via your own network, bank or accountant. The latter often have lists of potential investors. Many business angels also form informal investor networks.