If you are at this point, it is probably because you have managed to reach a very important milestone in the process of the conception of your startup: the validation of the business model. Now, in addition to execution, it becomes essential to find the necessary funds to continue the business and make it scale up. At this stage, you must also consider whether, in addition to financing, your startup may also need the guidance of an expert who can follow it during the crucial stages of growth; below you will find out what it is, why it is important and above all who to contact to find the right business angel for your startup.
Who or what is a business angel?
According to the European Commission, an angel investor or business angel is “a private individual, often with a high net worth, and usually with business experience, who directly invests part of his assets in new and growing private businesses. Business angels can invest individually or as part of a club deal in which one investor typically takes the lead.”
Therefore, the definition of a business angel represents people of great experience and financial capacity who invest their money in the pre-seed phase of startups, in exchange for a stake in the capital.
When a start-up finds an angel investor, it not only obtains capital but benefits from the skills, knowledge and professional experience acquired by the business angel in other related realities, as well as from his network of relationships.
The business management skills, financial resources and network of contacts brought by the angel investor contribute to the creation and development of the business model and make it possible for the startup to benefit from a series of advantages that a debt loan is absolutely unable to offer; in fact, the business angel fully assumes the business risk and his goal is the success of the project in the medium-long term.
The goal is to make the start-up scale up and ensure that his stake increases in value and his investment ensures a good capital gain.
The origin of the term “angel investor” comes from the theatrical and musical world of Broadway, where producers in need of funding turned to wealthy people from uptown, who went downtown to lend a hand financially to these cultural entrepreneurs as if they were angels.
Today, the business angels have moved from the stage straight to Silicon Valley, where they tend to support tech startups. Their financial participation in companies covers the gap between initial capital (which normally comes from people close to the company) and risk capital, which comes from investment funds and is carried out in the later stages of the business.
These angels are included in the “informal” investor category and usually invest between €25,000 and €100,000 in a company, although these figures can vary and occasionally increase enormously.
Difference between business angels and venture capitalists
Both business angels and venture capitalists are figures that deal with private financing for startups and both take calculated risks in hopes of earning a healthy return on investment (ROI).
So what is the difference between a venture capitalist and a business angel? Let’s take a look at some of the differences:
How they work
One difference between business angels and venture capitalists lies in the money they use to invest. A venture capitalist is a reality that invests in small businesses, generally using money raised by investment firms, large corporations, and pension funds. Typically, VCs don’t use their own money to invest; an angel investor on the other hand is a person who uses his own funds to invest in startups and focuses more on execution than on immediate profit.
Companies that are financed
Business angels and venture capitalists invest in startups in different stages. Venture capitalists tend to invest in startups that have already started in order to reduce the risk of losing investments, even if there are cases of VCs interested in proof of concept and pre-seed investments; angel investors, on the other hand, actually intervene in the early stages of their life cycle. For this reason, business angels take more risks than venture capitalists.
Another big difference consists in the amount they generally invest in companies. While business angels, using their personal assets, reach up to 100,000 euros, venture capitalists go over one million euros.
Business angels prefer growing sectors similar to their skills and experiences, while venture capitalists operate in innovative fields.
Business angels assist startuppers in the initial and most crucial phases and act as mentors, providing capital, knowledge, experience and networks. Venture capitalists work together with innovators, with greater control over the operations carried out by the company.
How to find a business angel: B-PLANNOW®’s bet
Why might you need a business angel startup?
Startups in Italy, as in the rest of the world, can make use of real guardian angels who, believing in the innovation of the project, decide to invest in the new business by providing capital and knowledge: these subjects are called business angels precisely because, like angels, they take on the risk associated with the development of a new startup.
Business angels are informal investors who differ from formal investors, such as credit institutions, which generally invest in venture capital and private equity funds. These are often professionals or managers who have experience in the sector in which they want to invest and therefore can offer the startup both specific knowledge to concretely develop the new idea (business angel consulting), and the capital to invest in the early stage. The relationship that is created between the investor and the entrepreneur is based on trust: the angel investor does not require particular forms of guarantee for his investment and for this reason he is also called informal.
This relationship is convenient for both: the company receives free guidance from an expert who follows it in the crucial phases of growth and the investor ensures a good investment, which, although risky, guarantees the medium-term (on average 5 years), of capital gains to be obtained with the partial or total sale of the initial shareholding.
When your idea and your team deserve it, B-PLANNOW® bets on its ability to make profitable investments both for yourself and for your startup. We know the risks inherent in high-potential investments and we know that the results will be seen in the medium to long term. Above all, we believe in the strength of the unique mix of skills, experiences and relationships to support young companies, like yours, in their journey towards scaleup.
B-PLANNOW® invests, as a business angel, only in the pre-seed phase, that is, in the embryonic phase of your startup, when a product or service may not yet exist, let alone a structured company. Basically, we finance an idea and a team and make skills, experiences, and networks available to you.
Our “startup business angels” service offers you:
- Mentoring and concrete support (from the analysis of the business model to the exit)
- Corporate consultancy
- Corporate identity
- Marketing mix
- Support for the growth of the management team
- Support for current and future fundraising (venture capital)
Now that you know everything about what it is, why it is important and above all who to contact to find the right business angel for your startup, all you have to do is contact us, submit your idea and find out if we can propose it together with you in a professional way to an investor or be the right angel investor directly for you!