Are You Cut Out To Be A Business Angel?
Financial Angels, aka business Angels, provide much-needed funding to entrepreneurs and small business owners, assisting them in establishing or growing their business. While business Angel funding is not yet being used to its fullest potential, increasing numbers of entrepreneurs are turning to these financial Angels for funding, particularly in this time of low bank lending and economic recovery. If you have toyed with the idea of becoming a business Angel, there is truly no better time than the present to enter this potentially profitable realm. Due to the current economic climate, there are deals to be had, and these deals have the potential of turning into highly lucrative investments in the coming years.
There are many reasons why people choose to become financial Angels, not the least of which is – of course – the money. Investing in promising start-ups as an individual or as part of a syndicate can result in significant returns, particularly for those who develop a diverse portfolio. And, there is a distinct sense of well-earned pride when you become a financial Angel, as it is often considered a clear indication that you have arrived. When you have achieved a position that allows you to provide funding for businesses, you have likely met at least some of your professional and financial goals, and your hard work is now paying off.
Aside from the financial aspects of being a private equity investor, some become financial Angels out of a desire to help others achieve their goals, promote small business ownership or put something back in out of gratitude for their own success. It should be noted that business Angels often go beyond merely providing funding and also lend their skills and experience to help ensure the success of the company in which they have invested.
Because financial Angels are most often investors who have a high net worth, it is a common misconception that someone must be rather wealthy to become an Angel. While it is true that a good amount of expendable income is required, it is not uncommon for an Angel to begin by investing as little as £10,000. Starting out with a modest investment is a good way to get your feet wet and to help you determine if private equity investments are for you.
If you are seriously considering joining the ranks of the thousands of financial Angels in the UK, here are a few other tidbits for your consideration:
- It is a good idea to have a legal mind on board who can assist you in reviewing documents, completing agreements and determining the terms of any deal.
- It is also a good idea to enlist the services of a corporate financier or accountant with experience in advising on tax issues and assessing business plans.
- You may want to consider teaming up or investing in parallel with a seasoned Angel who won’t mind throwing a bit of advice your way when needed.
- Like any other business endeavour, you will need to develop a plan that includes how you intend to realize your investment goals, as well as an exit strategy.
- Do not rush in. Take your time to find the company – or companies – that feel like a good fit and show promise.
- Once you have narrowed down your list of potential companies, take the time to learn more about the entrepreneur, management team or directors for each business. Make sure that you will be in good company and are not falling in with a questionable crowd.
Financial Angels play an integral role in the success of many small businesses and in bringing brilliant ideas to fruition. If the excitement of investing in promising start-ups is appealing to you, and you get a certain thrill from the idea of lending your business acumen to help others achieve success, becoming a private equity investor may be the perfect fit for you.
Image © Richard Masoner
