Angel Investment

Angel investors are individuals who invest their own money into small businesses in exchange for a minority share of ownership, typically between 10% and 25%. These investors are often experienced entrepreneurs or professionals with extensive knowledge of the business world. 

How does Angel investment work?

Angel investors can invest alone but usually they invest together as a syndicate, where a number of angel investors work together to pool their money and experience.  

Typically, angel investors can invest sums ranging from £5,000 to £500,000 in any one business, but larger syndicates can invest up to £2million. The amount depends on the specific requirements of the business and its potential for growth.

Angel investors often take a hands-on approach, offering more than just financial backing. Along with their capital, angel investors might provide valuable mentoring, advice, and access to a network of contacts. 

What are the benefits?

There are a number of possible advantages for smaller businesses that access angel investment:

• Mentoring: angel investors can often offer strategic, financial, and sector-related guidance to help achieve growth
• Decision making: angel investors typically take a 10% to 25% share of your business, which leaves you firmly in control
• Credibility: angel investment can give your business credibility for later rounds of investment (the investment signifies an investor's faith in the potential success of the business)
• Nothing to repay: angel investment does not require the business to repay or pay interest on the capital borrowed. However, angels invest to see a return on the sale of the business in the medium to long term. 

What are the potential drawbacks?

Business Angels can be a crucial lifeline for new business owners. However, this funding model does come with its set of drawbacks:

• Less control: entrepreneurs often have to part with an equity stake in their business, ranging from 10% to 25%, in return for the angel’s investment
• Expectation: angel investment can be risky for angels and their willingness to take on a higher risk is often accompanied by an expectation that they will provide input to support the business to grow
• No guarantees: there is no guarantee that your business will achieve growth as a result of the investment and the angel’s involvement
• Risk of a bad fit: it’s a good idea to carry out due diligence on any angel Investor to ensure that they are the right fit for you and your business. 

How do I get Angel Investment?

Angel investors look for early-stage businesses, that have the potential to grow quickly and provide a high rate of return to investors.

Businesses seeking angel investment must have a clear plan for growth, a pitch deck, and a clear set of financial statements and projections.

Tracking down the right angel can take time. It’s worth networking and talking to a lot of people to find the right angel network that is aligned with your business model.