Business owners often report that company finance of £10,000 to £250,000 can be very difficult
to obtain - even from traditional sources such as banks and venture capitalists. Banks generally
require security and most venture capital firms are not interested in financing such small
amounts. In these circumstances, companies often have to turn to "Business Angels".
Business angels are wealthy, entrepreneurial individuals who provide capital in return for a
proportion of the company equity. They take a high personal risk in the expectation of owning
part of a growing and successful business.
Businesses Suitable for Angel Investment
Businesses are unlikely to be suitable for investment by a business angel unless certain
conditions are fulfilled.
(1) The business needs to raise a reasonably modest amount (typically between £10,000 to
£250,000,and is willing to sell a shareholding in return for financing. Equity finance of over
£250,000 is usually provided by venture capital firms rather than business angels. The exceptions
are when several business angels invest together in a syndicate or when business angels co-invest
alongside venture capital funds. The sums raised can easily exceed £250,000. Raising finance in
the form of equity (shares) strengthens the business' balance sheet. Banks (or other lenders) may
then be willing to provide additional debt finance.
(2) The owners and managers of the business are willing to develop a personal relationship with
a business angel. This is important. Typically, business angels want hands-on involvement in the
management of their investment, without necessarily exercising day-to-day control. This
relationship can be a positive one for the business. A business angel with the right skills can
strengthen a business by, for example, offering marketing and sa