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WWW.FIDULINK.COM > Blog > Why use a Business Angel? The role of business angel for a business

WHY CALL BUSINESS ANGEL

Financing needs

A part of the financing of startups sometimes goes through the intervention of business angel. It turns out in many cases a decisive operator in the financing of a company. By definition, they are former executives or business leaders generally from the business world.

They are entrepreneurial-minded and invest in companies that bring new ideas, new methods and a lucrative return on their investments. For these funders and creators, it's about identifying innovative and promising projects where competition is not yet exacerbated.

Generally, they group together in networks or / and in formalized investment companies that allow contact between entrepreneurs and investors. Business angel do not work alone. An assembly can bring 5 to 10 business angel whose contribution of each one can vary between 10 000 to 50 000 Euros. It can be seen that the amounts invested by the business angel do not exceed one million. They are usually between 300 and 500 000 Euros.

In order to give more opportunities to the young entrepreneur, the business angel holds only a minority share (20% maximum in general) in the capital of the company. It is up to the future leader to look for the majority of his funding.

All sectors of activity are of interest to the business angel. A large part concerns information and communication technologies. Without omitting services and industry, projects in the field of health and sustainable development are also of interest.

They can benefit from their financing on the express condition that there is an agreement between the two parties. The business angel pays particular attention to the creator of the project and his team rather than to a display of numbers and future projections. The investor insists on their motivation and their ability to adapt to a new situation. The project of the company must be feasible, innovative, while presenting a great potential for growth.

Share the know-how

The business angel is not just confined to the role of funder. He knows full well that the entrepreneur is not yet at the embryonic and theoretical stage of his business.

He provides his recommendations and accompanies the young creator throughout the project and in decision-making. Thanks to his skills as a former business leader, the business angel knows how to measure risks and has the ability to react to all situations. He engages in sectors of activity closely related to his experiences.

The young entrepreneur has the opportunity to take advantage of the relational networks of the business angel. Thanks to his address book, the future entrepreneur has a multitude of contacts in economic, financial, or even political circles.

This diverse knowledge provides support and assistance for future steps. This favors the intervention of new investors in venture capital fund financing.

If we use the business angel, it is also because it has flexibility of action by acting at all stages of the business, the seed (research, implementation of the project), the development of the product or service In this case, the investment involves risks but in return it must generate considerable potential gains. On the other hand, the banking institutions provide more credit facilities to companies that have used business angel financing. The critical moments are during the creation phase and during the first 2 or 3 years. Banks prefer not to take risks with Startup, but creators must be creative to convince business angels.

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