Business Angels

Business ‘angels’ want to invest money in new businesses. They could well be the saviour of your business – if you can find out who they are and get them interested.

These business 'angels' are often entrepreneurs or retired executives who can't quite kick the addiction of the business world and are intrigued by the prospect of backing a new winner.

Business angels often keep a very low profile and are difficult to find, as they don’t want to be bothered by worthless propositions. But the hit BBC2 Programme Dragons’ Den, where successful business people listen to the pitches of would-be entrepreneurs and hand out money to the people that impress them, has raised their profile.

Business angels use their own resources and invest in small lump sums. A typical amount would be £30,000. They differ from major venture capital firms, who tend to invest much larger sums and are usually not interested in offering the levels of funding that small firms need. With no formal procedures, angels can often make quick decisions whereas venture capitalists are likely to take a lot longer.

Any business from almost any sector is eligible for this kind of funding. However, a potential investor will want to back a firm with serious growth potential, rather than a business designed to provide a comfortable living for the owner. You need to think hard about what your business has to offer, and have concrete plans in place for how the business will grow. Angels want to see the detail of your proposition and be sure that you have thought about all the potential downsides.

If you think that your business has a competitive edge, a unique selling point and is scaleable – has the ability to grow - an angel is going to be much more interested. In return for a cash injection, your angel will expect a stake in the business, plus some idea of how he will get his money back. The angel will also want a non-executive seat on the board, and probably some kind of hands-on involvement.

Don’t be put off by the angel paying close attention to your business. Remember they are people for whom business has been their life, and their expertise and advice can be as important as cash. You won't have to give up day-to-day control of your business.

Finding an angel can be hard. The best thing to do is to approach organisations that match cash available for investment with cash-hungry companies. Alternatively, you could apply to be on the next series of Dragons’ Den.

Useful link: British Venture Capital Association, http://www.bvca.co.uk.