A. What is a Business Angel?
A business angel or angel investor is an individual who makes direct investments of personal funds (eventually from a management company or family fund) into a venture, typically early-stage businesses (not stock quoted). Because the capital is being invested at a risky time in a business venture, the angel must be capable of taking a loss of the entire investment, and, as such, most angel investors are high-net-worth individuals.
Investment strategy and Ticket size
They ideally engage into several investments in order to deploy a portfolio strategy to manage risk and to diversify. Mostly they engage in investments of 10.000 EUR to 250.000 EUR per company. Investments in capital shares are the most common modus operandi, but a convertible loan as well as a SAFE might occur.
Beyond financial investment
Besides their financial investment, angels also invest in the venture in terms of unpaid time allocated for strategic advice, mentoring and enabling relevant contacts to foster the growth of the company, however mostly through a board or advisory function. Becoming part of the management team is an exception. Delivering services in exchange for equity is not a typical angel characteristic. Both investments together constitute the “two wings” of the angel investor.
Business angels do this for a variety of reasons: to give-back to their communities, the opportunity to work with entrepreneurs, to stay engaged and to work with fellow angels in building enterprises, just to name a few. Return on investment is an important metric of their success and is mostly created through an exit from the company, however it is not their sole motive for engagement.
Business angels understand that the exchange of diverse perspectives leads to better investment decisions. Therefore business angels strive for a diverse ecosystem and do strongly lean against discrimination by any means. Business angels understand that co-operation beats competition.
Business angels do not invest in businesses with business models that rely on ecological or social exploitation. In negotiations, business angels are committed, true to their word and decisive. It is understood that tough decisions need to be made but feedback shall be provided in a fair and transparent fashion.
Business angels are confidential about sensitive information provided by startups and other investors and shall never be used for other purposes than the investment decision. Business angels are convinced of their positive impact, of their investment activities and actively encourage other people to become angel investors by their exemplary behaviour and an openness to share their knowledge.