One way of raising share capital from external investors in return for handing over a share of the business is equity finance. This can take many forms, including sharing of future profits, but is most commonly associated with sharing the ownership of the business to some degree. The two main providers of equity finance for private businesses are “venture capitalists” - also known as private equity firms - and business angels.

What are business angels?

Business Angels are wealthy individuals who invest on their own, or as part of a syndicate(a team), in high growth businesses. They are a helping hand to the business and in addition to money, Business Angels often make their own skills, experience and contacts available to the company. They rarely have a connection with the company itself before they invest but often have experience of its industry or sector.

They typically invest in businesses with:

• an investment need of between £10,000 and £750,000
• strong early stage development or expansion
• a good presence in a particular sector
• the potential for high return

What do they look for in you?

• Financial commitment of the entrepreneur
• A competitive edge or unique selling point
• Expertise and a good track record within founders and management
• Growth potential of the market
• Compatibility between the management, proposal and the business angel's skills and investment preferences

What should you look for in them?

Business Angels tend to invest between £10,000 and £750,000, where larger amounts are invested in a business, it is more likely to be as part of a syndicate organised through personal contacts or a Business Angel Network. The lead investor is referred to as the "archangel". Make sure you are aware of your business’ needs before selecting an angel, or syndicate. They invest across most industry sectors and stages of business development, focusing on early- and expansion-stage businesses.

Angels prefer to invest in companies within 100 miles of where they live or work. Investors in technology companies tend to be more prepared to travel longer distances. Your business management team and the business angel should agree on prospects, be compatible and be able to work well together. This is your investment and although they might think they know what’s right, you need to agree, if the managements not happy there could be big problems in the long run. Their skills must match the companies’ needs; make sure your angel is right for your company.

Advantages of having a business angel

They make an investment decision quickly, without complex assessments. However, you will need to draw up a professional and adapted business plan.

Most angels can bring valuable first-hand experience of either working in a small business or running their own business venture.

They're likely to have local knowledge, as they have a tendency to focus their investments within a narrow geographical location.

Some angels may be eligible to have their investment funds matched by the government under its Enterprise Capital Funds (ECFs) within its Finance for Business product. ECFs are commercial funds, targeted at small and medium-sized enterprises and investing a combination of private and public money against a share of equity.

Disadvantages of having a business angel

They don't make investments very regularly; a typical Business Angel makes one or two investments in a three-year period, either individually or by linking up with others to form a syndicate. Some Business Angels invest more frequently.

They often aren’t actively looking for opportunity so can be difficult to find.
Tracking down the right investor may take longer than expected and can typically take several months.

How to take the next step at finding your angel;

Ensure that your organisation has a lawyer, an advisor and a comprehensive business plan.

Take a look at the British Business Angels associations website or The Angels Den;
http://www.bbaa.org.uk/ http://www.angelsden.co.uk/