Business angels are spreading their wings. The Angel Investment Network says last year saw a record number of people registering as angels – investors who are prepared to back start-up businesses with funding and their expertise – and the number of connections between angels and entrepreneurs rose 16%. That is good news for business owners looking for support for their fledgling enterprises.
Business angels come from a variety of backgrounds and may operate individually or as part of a syndicate, investing their own money in start-up ventures. They are typically prepared to back companies at an earlier stage than investors such as venture capital and private equity firms. And they often offer valuable insight, as well as cash, helping inexperienced entrepreneurs to navigate the path to growth.
Seeking support
If you’re looking for angels, there are several good places to start the search. The UK Business Angels Association effectively operates as the UK’s trade association, with 650 members who invested £2.3bn last year. The UK is also home to several prominent networks of business angels, who share opportunities and pool information: the most active of these in 2021 included Envestors, Minerva Business Angel Network and Cambridge Angels, says start-up platform Beauhurst. And entrepreneurs should not feel bound by geographical borders; the Angel Investment Network and Angel Capital Association, both US-based, have many members who invest on a global basis.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
With so many potential sources of angel capital, it makes sense to be discerning. Business angels will naturally want to conduct extensive due diligence before parting with their money, but this should be a two-way process. Entrepreneurs should be interviewing potential investors just as they are being interviewed themselves.
Founders will want to know that angels have the financial capacity to make the investment, but other qualities may also be paramount. Does a prospective investor have expertise in the area in which you operate? How much experience do they have of the investment process? Will they be able to provide ongoing advice to your business, acting as a mentor to the management team?
Hands-on or silent partner?
One particularly crucial question is how hands-on a business angel wants to be. In some cases, angels are looking to operate as more or less silent partners, leaving the entrepreneur to run the business on a day-to-day basis. Others are looking for much more involvement; they won’t want to take on an operational role, but they will expect to be consulted regularly and to be involved with key strategic decisions.
There isn’t a right approach, but entrepreneurs need to be clear about what they want. If you’re looking for active and regular support, a silent partner may not provide it; if funding alone is the priority, having a more involved business angel may cause tensions.
Given these nuances, it is important that entrepreneurs and potential angel investors take some time to build a relationship before sealing the deal – anywhere between three and six months is pretty typical. The conversation doesn’t have to be exclusive; there is nothing to stop founders exploring investment from several angels before making a final decision.
-
UK growth: opportunities amid tariff turbulenceIain McCombie, joint manager of the Baillie Gifford UK Growth Trust, explains how adaptable UK companies in growth-driving sectors can prosper over the long term despite international trade restrictions.
-
These British stocks are a bargain – should you buy?From high street favourites such as Sainsbury’s and Greggs to healthcare firms, these stocks are trading at a heavy discount
-
'Rachel Reeves' plan to force pension funds into UK assets won't work'Opinion Hustling pension fund cash into British assets sounds like a good idea. It would be better to make Britain an attractive place to invest, says Matthew Lynn
-
Supersonic travel: How China could 'leapfrog' US and Europe's commercial aviation industryOpinion Innovation in commercial aviation has been stuck for 60 years. A commercial supersonic jet might be back on the market soon, but will China get there first?
-
How British businesses can tackle Trump's tariffsThe majority of British businesses are likely to take a hit from the chaos caused by Trump’s tariffs to reorder global trade. Companies in the firing line face some difficult decisions, says David Prosser
-
Trump wants to colonise Mars – will it happen?Donald Trump wants to plant the US flag on Mars. Could humans really live there?
-
Why are energy bills so expensive in the UK?Electricity bills in the UK are higher than in any comparable rich country. Some blame the net-zero zealotry of the government for that. What is really to blame for high energy bills?
-
Will Putin invade Europe? Why investors know Russia is a paper tigerOpinion Markets are right to ignore talk of Putin invading Europe, says Max King.
-
Why French far-right leader Marine Le Pen has been banned from running for officeMarine Le Pen, presidential candidate and leader of France's right-wing National Rally party, has been barred from standing by the country's judges.
-
Five years on: what did Covid cost us?We’re still counting the costs of the global coronavirus pandemic – and governments’ responses. What did we learn?
