Business angel investors are high net worth individuals who usually provide smaller amounts of finance (€25,000 to €500,000) at an earlier stage of startups, a point in time, where only a few venture capital funds are able to invest. They are increasingly investing alongside seed venture capital funds.
They usually contribute much more than pure cash – they often have industry knowledge and contacts that they pass on to entrepreneurs. They bring along with them a large network of investors and others contacts in the industry.
Angels will often take non-executive board positions in the companies in which they invest. Besides capital, business angels provide business management experience, skills and contacts for the entrepreneur, which increase the likelihood of startup enterprises to survive.
Good business angels can provide “smart and patient capital”. They are increasingly important in providing risk capital as well as contributing to economic growth and technological advances.
In others words, they are a multi-facettes solution to the usual issue that startups too often encounter when they envisage the traditional source of early-stage financing – bank lending – which limited due to risk level and handling costs.
The supply of startup and early-stage equity finance has to some extent become more dependent on business angels, as venture capital funds are not able to accommodate a large number of small deals.
More info via European Business Angels Network.
The 7 Things You Think You Know about Business Angels