Mark Lyttleton is an angel investor and business mentor who takes a particular interest in companies created to exact a positive planetary impact. This article will take a closer look at angel investment, exploring the benefits and the pitfalls from both the investor and business owner’s perspectives.
An angel investor is someone who invests their own funds in a business in exchange for a minority stake in the organisation, typically somewhere between 1% and 20% of the company’s total equity. A business angel is usually someone with considerable experience of the business world who is able to provide much more than just collateral. The embedded infographic provides statistics on angel investment in the UK in 2021.
In addition to providing financial backing to promising start-ups and early-stage businesses, angel investors also offer support and mentoring services, providing founders with the considerable benefit of their time, skills, business knowledge and contacts. Alongside angel investors, the embedded PDF outlines a selection of other popular funding routes available to entrepreneurs in 2023.
An angel investor can take a hands-on approach, spending a great deal of time with the entrepreneur and helping them to propel their business on an upward trajectory. It is crucial that the angel and entrepreneur enjoy a strong relationship, since they could spend up to five years collaborating closely as the business is built.
Angel investors generally have a strong business pedigree. They may be a professional, like an accountant, financial advisor, doctor or lawyer. Alternatively, many angel investors are C-level executives who have risen through the ranks and know what it takes to grow and operate a successful business.
Some angel investors are small business owners or entrepreneurs who have already launched successful companies. Others are investors who regard financing small businesses as a professional pastime.
From the business owner’s perspective, there are multiple benefits of bringing an angel investor on board, including less administrative work and more cash down the line, as well as providing the benefit of the business angel’s knowledge, experience, skills and contacts. However, not all business owners are prepared to relinquish control over their company or give up equity.
From the angel investor’s point of view, investing in early-stage businesses is high risk, although there is potential for high returns too. Other benefits include bringing them into contact with interesting entrepreneurs with fascinating ideas and enabling them to support causes they care about. Angel investing enables accomplished business leaders to apply their current skills in new ways, learn new skills, choose their investments and control their long-term income by investing in start-ups that resonate with them. The embedded video provides pointers for anyone interested in becoming a business angel to consider.