Business angels (private investors)
Business angels are individuals who invest in your company from a business perspective. They are or have been entrepreneurs. They are also referred to as private or informal investors.
How do business angels operate?
A business angel generally invests in pre-start-ups, start-ups, and entrepreneurs in their early growth phases. Investments usually range between €50,000 and €750,000 in the form of a loan or in exchange for ownership equity. Business angels operate as individuals, in networks or in funds.
Individual angels
Business angels like these invest on their own behalf. They are wealthy individuals who tend to regularly invest in entrepreneurial ventures with their own money, in sums typically ranging from at least €25,000 to over €1 million, and sometimes even more.
Angel networks
Business angels that are part of an angel network can invest individually. However, they have the added advantage of working collectively in the screening process and reviewing deals, and having the option of investing in new ventures together. In the Netherlands there are a number of angel networks that are united through the networking organisation Business Angels Networks (BAN) Netherlands. They also have a European and International branch. However, access to their website is restricted - if you want to contact them, best go through your bank or accountant.
Angel funds
In an Angel Fund, business angels pull their resources together but act as one investor. This means they decide as a whole on each investment; no individual investments are made. By doing so, each venture that receives funding will receive a much larger sum. Being able to pull capital resources together is beneficial because it prevents the entrepreneur from needing to seek further outside financing from other sources such as venture capitalists. This ensures that angel investors will reap a greater return on their investment.
Why choose a business angel?
There are various options for obtaining financing. In addition to money, a business angel also offers knowledge, experience, and a network. They also offer:
- Flexibility:The terms of the investment are often more flexible than those offered by a bank. Consider, for example, the repayment schedule or the distribution of shares.
- Speed: The process of obtaining financing from a business angel is usually faster than with a bank or a larger investment company.
It is important that you and the business angel(s) get along well. You will be working together a lot. If you do not get along, it can lead to conflicts. So, research the business angel thoroughly in advance. What is their reputation? In which businesses has the business angel invested before? And what was their role in those investments?
Working with a business angel
In addition to money, a business angel also contributes knowledge and experience and gives you access to their personal network. Especially in the beginning, a business angel is closely involved in the day-to-day running of the business. The investor guides you based on his or her own entrepreneurial experience. As your business improves, a business angel gradually withdraws.
If you give a business angel a share in your business in the form of shares, they will have a say in decision-making, especially in the early stages. A business angel wants to recoup their investment with a good return. Expectations are often high and the pressure can increase..
Where can I find a business angel?
You can find a list of potential investors in the TechLeap.nl Finder,
Many business angels are affiliated with the association of Business Angels Netwerken Nederland (in Dutch). More information about finding investors can be found at kvk.nl. Would you like to work with a business angel? Then read more about working with a business angel on KVK.nl.
Watch this video for an overview of ways to finance your business, including private investors.
Get help with financing
Getting help increases your chances of financing. The right advisor knows what to look out for and what you need to provide to the business angel. These advisers will help you on your way.
In addition, seek sound advice from a solicitor or financial advisor about the investment agreement. Ensure that the agreements regarding shares, the role of the business angel and the exit strategy are clear.