Introduction to angel investment

Introduction to angel investment

Angel investment is also known as equity finance. An individual who is classed as a high net worth individual and can use his own finances, especially disposable, is called an angel investor. An angel investor can make his own decision regarding the investments he wants to do.

An angel investor usually takes shares that is equity into his business for the exchange of funds known as equity finance. This is how the investors not only provide finance to your business for its growth but also helps your business entity with their knowledge and expertise so that your business can reach the heights of success.

Theinvestors can invest alone, or they can be a member of the group of the angels. Every angel investor in that group of investors has different investment ranges, so their appetite for investment also differs.

//Normal investment lies between £10,000-£50,000. There is a process called syndication due to which the investment deals of £2 are becoming more common.

Angel investors try to invest in the investments that have returns for more than the period of 3 to 8 years. Therefore, whenever it’s about making an investment, the angel investors make sure your business will be able to fulfill their specific criteria of returns.

The angel investment market

The angel investment is regarded to be one of the most important sources of finance and investment for business startups, this helps it pass through its early development stage.

These investments are the sources of equity for business to achieve growth. However, it’s becoming very tough for the markets to calculate these types of investments because the angel investors are now investing in a private manner.

According to an estimate, about £1.5bn is invested annually by the angel investors in the UK. This amount of £1.5bn is more than 3 times of the amount that’s needed to be invested in the early stages of the business annually, this is called venture capital. 

Another estimate states that there are more than 18,000 investors present in the country. This number is less than what is needed for an individual to perform the role of a business angel investor, so that they could provide investments to the businesses for their necessary growth.

How does angel investing differ from VC investing?

Angel investment and venture capital are two different things, this is because venture capital investments in businesses are made via investment managed funds. Those managed funds are usually raised publicly or privately.

In venture capital the capitalist is the manager who doesn’t invest their own money, rather they invest money on behalf of other people to help them in getting high returns of investments. Venture capital usually has high costs of admin and they are highly selective in nature as it’s tough to tell which venture will provide more in return.

Venture capital funds are highly risk-averse, and there are fewer in investments. For all these reasons, business angel investors and their investments are more popular and are getting more importance as the type of financing, especially for new business ventures who need relatively small amounts of finance. These financing are especially for the businesses who can be financed by venture capital investments.

Business angels have different investment schedules from managed funds. Angel investments have their own decisions powers regarding the investments they are going to make.

Angel investors do direct meetings with the businesses they want to make deals with, and they make sure their investments are safe.

The angel investors don’t include any agents in the investment process and they don’t let anyone involved, due to the diligence process. They are the real signatories on the investment documents. They are usually presented at the time of an investment deal, but in the case of their absence, there are syndicates.

The angel investors don’t only provide finance to the businesses, rather they take an active interest in the decision making of the company’s board or play this role by themselves.

As the size of investment of both the venture capital and business angel investor differ, their investment approach also has a significant difference. In other words, angel investments are also known as patient capital. However, one thing remains the fact that angel capitals are more concerned with the growth of the business they are supporting rather than generating fast returns out of their investments.