Are you a business angel?

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European business angel’s network describes business angel as a “private individual who invests (part of his personal assets) in a start-up and also shares his personal (business management) experience with the entrepreneur. Investment often takes place in the early days of the investee business's existence. Genuine business angels are therefore experienced entrepreneurs themselves, who invest venture capital in exchange for stock and are personally involved in managing investee businesses.”


Main business angels characteristics

 

According to European Business Angels Network, business angels have following characteristics:

 

  1. Mostly male, rarely a female;
  2. Aged between 35 and 65;
  3. Successful experience as an entrepreneur or a manager;
  4. Available at least one day a week to advise trustworthy entrepreneurs;
  5. Generally feel that the longest they are prepared to commute to investee businesses is two hours by car;
  6. Prepared to invest EUR 25,000–250,000 or around 25% of their own funds in a single deal;
  7. Own funds (in the UK, at least) upwards of EUR 400,000 Euro (not including real estate);
  8. Also contribute their network of personal contacts in business and company finance circles;
  9. The added value of a Business Angel as an investor is his experience and the commitment to share it.

Types of business angels

 

In the literature of the informal venture capital there has developed in the last few years a taxonomy or classification of angels, sometimes resulting in unfortunate terminology. There are virgin angels, latent angels, wealth-maximizing angels, street-walking angels, entrepreneur angels, income- seeking angels, corporate angels, archangels, and corporate and institutional archangels.

 

Gaston (1989) divided business angels into 10 categories of informal investors. The most central categories are:

  • “Business devils” (investors who invest more than 50% of the voting equity);
  • “High Tech angels” (which are only interested in investing in firms that manufacture high technology products);
  • “Daddy Warbuck” (investors with net worth of $1 million or more) and
  • “Peers” (indicating entrepreneurs investing near their home/place of work).

Landstrom (1992) identify four groups of informal investors: individuals in the business environment, investors with no prior connections to the firm who invest small amounts of capital per deal, informal investors who make few investments but larger amounts per deal and professional informal investors.