Business angel (BA) investment is a form of venture capital funding where private individuals invest in companies in exchange for a share of their equity. Most BAs invest between £10,000 and £500,000.
How BAs invest
BAs invest in start-ups or young businesses needing to fund activities such as product development or market expansion.
Many investments offer potentially high returns but also involve high risks. A BA investment can often result in the total loss of the amount invested, while other investments may provide a 10x + return depending on the success of the business.
This has led to the introduction of the Enterprise Investment Scheme (EIS) and more recently the Seed Enterprise Investment Scheme (SEIS). EIS and SEIS are the two best tax schemes for investors in the world and they can dramatically reduce the risk involved for BAs.
BAs can make investment decisions quickly but will still need to see that you have a good business plan before they commit. Many specialise in particular industries, making them a potentially valuable source of expert knowledge and even mentoring.
Government match funding
The government provides some funds to match BA investments, such as those provided in Northern Ireland by techstart NI (ERDF) and Co-Fund NI ll (ERDF).
- techstart NI (ERDF) provide funding support for entrepreneurs, seed and early stage SMEs and university spin-outs
- Co-Fund NI ll (ERDF) have a £50m equity fund that co-invests alongside business angels and other private investors
The Angel Co Fund operates on a similar basis to Co-Fund NI ll (ERDF), where it will allow angels to complete a funding round.
Finding a business angel
BAs may not make investments regularly and it could take you several months to find a suitable investor.