Business angels (2024)

A business angel is a private individual, often with a high net-worth, and usually with business experience, who directly invests part of their assets in new and growing private businesses. Business angels can invest individually or as part of a syndicate where one angel typically takes the lead role.

Besides capital, angel investors provide business management experience, skills and contacts for the entrepreneur. Experienced angels also know that they may have to wait for a return on their investment. They can, therefore, be a good source of ‘smart and patient’ capital.
Business angels play an important role in the economy. In many countries, they constitute the second-largest source of external funding in newly established ventures, after family and friends. They are increasingly important as providers of risk capital and contributors to economic growth and technological advances.

Tools to promote business angel investment are the responsibility of EU countries. They should create incentives for private individuals who are willing to invest in enterprises. This should include the use of public funds for co-investment with business angels.
The European Commission encourages EU countries to learn from good practices by supporting business angel investments, particularly across borders, and by cooperating with venture capital funds. The Commission is also supporting good practice in investment readiness training.

Related business angel activities

The European community of women business angels and women entrepreneurs

The goal of this initiative – funded by the European Parliament - was to support women entrepreneurs in accessing alternative sources of funding: by raising the awareness of business angels, training women who would like to become business angels and helping women entrepreneurs to present their business ideas to potential investors. The network was created in 2017, through 4 projects covering 14 EU countries.
See the support tools and networks for women page

Study on the nature and impact of business angels in funding research and innovation

The study is based on documental research, a survey, and a series of interviews with business angels and entrepreneurs from 33 European countries. It gives detailed insight into their economic and professional behaviour throughout European venture capital markets and national contexts. The document also presents best practices for support measures and innovative schemes for business angels’ investments, as well as policy measures to support business angels.
See the study on business angels’ funding impact on R&I

Study to evaluate tax incentive schemes for venture capital and business angels

In 2017, we published a study to evaluate existing tax incentives schemes for venture capital and business angels, analyse and assess possible designs for potential new schemes, and put forward policy recommendations for the future.
See the study on tax incentive schemes

Guidebook on fostering business angel activities in support of SME growth

This guidebook describes how to support investments and co-investments of business angels in sectors, regions or EU countries where their presence is still limited.
Download the guidebook

Business angel networks

Business angels (2024)

FAQs

What are business angels in business? ›

A business angel is a private individual, often with a high net-worth, and usually with business experience, who directly invests part of their assets in new and growing private businesses.

What is an example of a business angel? ›

Examples of Business Angels are high net worth individuals, foundations, research centers, nonprofit societies, corporations acting as donors, etc. They usually invest in a startup, early-stage, or developing firm.

Why are they called business angels? ›

Although they don't sport wings or halos, the term does come from the world of theatre, stages and costumes. Back in the 1900s, Broadway producers would turn to the wealthy for financial help – those who gave money were called 'angels'. Today, successful angels investors are better known for supporting tech start–ups.

How do business angels make money? ›

Angel investors make money by backing very early-stage startups they find promising, in exchange, they receive an ownership stake and expect returns if it succeeds.

How do you attract business angels? ›

How to find angel investors
  1. Get involved with angel groups and angel investment networks. ...
  2. Attract interest to your business on social media. ...
  3. Attend networking events. ...
  4. Compete in startup events and pitch competitions. ...
  5. Talk with fellow founders. ...
  6. Engage with an incubator or accelerator. ...
  7. Participate in local startup ecosystems.

What is another name for a business angel? ›

An angel investor (also known as a business angel, informal investor, angel funder, private investor, or seed investor) is an individual who provides capital to a business or businesses, including startups, usually in exchange for convertible debt or ownership equity.

What are the disadvantages of business angels? ›

Disadvantages of business angel financing

takes longer to find a suitable angel investor. giving up a share of your business. less structural support available from a BA than from an investing company.

Why are business angels good? ›

Business angels provide valuable knowledge

Because most angel investors are seasoned investors, they provide expert support, contacts, and guidance that can help your business skyrocket. Their experience, insight, and resources can be of significant value for your business's growth.

What is the difference between business angels and investors? ›

An angel investor works alone, while venture capitalists are part of a company. Angel investors, sometimes known as business angels, are individuals who invest their finances in a startup. Angels are wealthy, often influential individuals who choose to invest in high-potential companies in exchange for an equity stake.

How to become a business angel? ›

How to become an angel investor
  1. Understand how it works. ...
  2. Understand the risks. ...
  3. Use your resources. ...
  4. Find and evaluate potential investments. ...
  5. Join a group or platform. ...
  6. Develop a strategy. ...
  7. Decide what type of investor you are. ...
  8. Choose a valuation method.
Jun 30, 2023

What do business angels look at before investing? ›

Above all, angel investors are looking for a high rate of return on their initial investment. They'll want to know if the business idea fills a gap in the market with potential for significant growth. The product or service should be new and exciting – so you'll need a heavy-hitting, detailed pitch to sell it.

Who are professional angels? ›

Professional Angels

These are investors who have a background in finance and make investment decisions solely based on financial returns.

How do angels get paid? ›

How does an angel investor get paid? An angel investor typically gets paid through a return on their investment, either when the company they invested in goes public or is acquired.

Is Shark Tank angel investor? ›

An angel investor is an individual who invests in startups usually in exchange for an agreed-upon percentage of ownership in the company. So, while by definition these Shark Tank hosts are, in fact, angel investors, they look and act differently than the angel investors who invest beyond the tank.

How much money do business angels typically invest in a single company? ›

How much an angel is willing to invest can vary significantly based on factors such as a company's valuation. However, according to the Small Business Administration, the average angel investment is about $330,000 and the angel expects to make a profit of 20% from the investment.

Why are business angels important? ›

Business angels provide valuable knowledge

Because most angel investors are seasoned investors, they provide expert support, contacts, and guidance that can help your business skyrocket. Their experience, insight, and resources can be of significant value for your business's growth.

What is an angel business owner? ›

An angel investor is a high net-worth individual with available investment capital who, in exchange for an ownership stake in the business, is willing to take a risk with their money to help fund promising startups.

What is the role of an angel investor in a business? ›

An angel investor provides initial seed money for startup businesses, usually in exchange for ownership equity in the company. The angel investor may be involved in a series of projects on a purely professional basis or may be found among an entrepreneur's family and friends.

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