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What is a Business Angel?
A business angel is a professional person with experience as a company director, owner or manager and with funds to invest in start-up and early stage ventures. As well as financial resources, business angels should be able to offer skills, expertise and contacts. Business angels vary in experience, background, expertise, the amount of funding they have available, as well as in their industry and geographical preferences. Business angels are a vital route to funding as well as an invaluable source of business acumen for the start-up and early stage entrepreneur. |
Business funding below £50k can often be achieved through a personal bank loan. At the other end of the spectrum, for businesses seeking over £1million, the venture capital market comes in to play. What is more difficult to fund is the range in between, the so-called “equity gap”. It is here that private business angel investors can help. This part of the economy is greatly under-served by the traditional financial market mainly because of the risks involved in start-up and early stage ventures. However, it is these companies that offer the greatest potential for the future development of the economy. This is the challenge for the Private Venture Capital industry.
Only a small number of new proposals gain funding. This is largely due to planning. Using an experienced business angel consultancy such as BACapital can maximise your chances of success.
In our experience, investors look for certain key factors in the business plan of a start-up venture.
While everyone is continually looking for a winning system, there are some fundamental questions that entrepreneurs should always ask themselves.
How distinctive is the product or service and what competitive advantage does it have? How can it be protected and what are the barriers to entry for the competition? Why hasn't the product or service previously been available?
What is the market potential and what are the factors that will lead to successful target market penetration? Has comprehensive market research been carried out?
What are the assumptions that drive the revenue projections and the costs described in the financial model? Are they realistic? Can the risks be identified?
Investors often look at the people before the project. Who are the managers behind the venture, what is their expertise and experience, why are they planning the business and are they likely to be successful?
Investors are also keen to know how much commitment has been made to the venture - has the entrepreneur spent any money on it? People talk about the amount of lost earnings they have suffered and the 'sweat equity' they have employed having given up their previous job, but it is hard cash put into a project, even £1,000, that can make a difference to the attitude of investors. Obviously many may have spent several tens of thousands of pounds or more of their own money, but it is the difference between something which is merely an idea and something that has been at least partially developed and committed to that can generate that all-important initial interest.
Investors look for certain things in entrepreneurs. Are they realistic? What is their background and experience? Are they qualified to undertake the venture (not just educational certificates)? Have they done their research and sufficient planning?