How business angels network works?

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Business angel’s networks (BAN) are public or private organizations, which acts as intermediaries between business angels and entrepreneurs. The information gap which exists between business angels and entrepreneurs is a major obstacle in ensuring steady deal flow for business angels and financing for entrepreneurs. Thus one of the most important goals of business angel networks (BANs) is to provide a channel of communication between business angels and entrepreneurs seeking venture capital.

 

Tipical services of BAN

 

The services provided by BAN depend on the nature of the BAN, financing of the BAN as well as demand from business angels. The national BAN will be dealing mainly with other BAN’s and its services won’t be concentrate on matching or developing sufficient deal flow. On the other hand, project screening and matching could be the main services provided by regional BAN’s.
Below is summarized all main services and activities of BAN’s:

  •  Recruiting business angels;
  •  Developing sufficient deal flow;
  •  Providing hands-on matchmaking;
  •  Creating and managing matching databases;
  •  Developing standardized contracts;
  •  Establishing ethical guidelines;
  •  Lobbying interface with governmental agencies;
  •  Teambuilding and training;
  •  Organizing business plan competitions;
  •  Publishing newsletters, magazines;
  •  Organization of various seminars;
  •  Screening of projects;
  •  Mentoring;
  •  Legal support;
  •   Organization of monthly/quarterly forums for presentations of projects by entrepreneurs.

Financing of BAN

Potential financing sources for business angel network activities include public funding, membership fees, success fees, training fees, and sponsorship.

Public support is crucial for BANs, especially in the first years. Around half of the angel networks receive some kind of public support from local, regional or EU Member State authorities. Most of angel networks would not exist without this financial support, particularly in the beginning of their activities.2 As EBAN studies show, business angel network on average manages to break even only after five years of existence (Source: Gullander S., Napier G. Handbook in business angel networks- The Nordic case, 2003).