Who are these famous business angels and how can you successfully finance your business thanks to them? If they are known to participate actively in the financing chain, especially where it is not necessarily very efficient, it may be useful to identify the contours of their interests.
Business Angels (BA): Who are they and what do they finance?
They are mostly natural persons, but can sometimes invest through a legal structure. They usually invest some of their personal money in an innovative business with potential. This participation is accompanied by an equity investment.
The difference with other types of shareholders
BAs do not have a third party to whom they are normally accountable. For this reason, they are less hesitant to take strategic risks than a financial company under pressure from its shareholders. They therefore often take more risk than other types of investors, knowing that they are aware that they can lose their investment.
In France, the financing of business establishment continues to be largely provided by the BAs. Their minimum financial contribution is 5,000 euros. The average sum invested is between 100,000 and 500,000 euros for a group of BAs. The BAs do not just bring money: they support the entrepreneur in the development of the business by offering them advice and opening their address book. Giving the entrepreneur some of their time, their skills, their enthusiasm for the project and a valuable outside perspective, this is also the role of the BA.
The second point of view
The BAs hold on average 15-45% of the capital and almost always remain minority shareholders. They do not directly intervene in the management of the company because they often seek to protect their personal assets. On the other hand, they can have a very large influence on major strategic decisions by integrating the board. Namely: they are never paid for the services they provide to the company.
Business Angels are sensitive to:
- An entrepreneur and a quality team.
- Product/market fit.
- The ambition of the project: The BAs are generally only interested in innovative projects or projects with a significant development ambition.
- An outflow of capital in the long term. The purpose of BA is not to keep its shares in the company’s capital forever (min. 4/5 years and max. 6/7 years).
- Realize an interesting capital gain on resale.
- Proximity: They generally want to be able to meet the company easily.
- Project Maturity Stage: They generally expect that the market research has already been done.
- Knowledge of the activity sector: or its understanding to be able to assess its potential and to be able to provide useful support to the entrepreneur.
- A good concise and precise summary of maximum 4 pages (generally at the beginning of the business plan)
- An entrepreneurial adventure, a passion to get involved in.
- The feeling of supporting the dynamism and the creation of jobs in their region.
- Tax exemption for part of the ISF thanks to the TEPA Act or the Tax Reduction Act (25% SME).
Where do you find Business Angels?
There are many local associations, but the France Angels association gathers the majority of the Business Angels (BA) network. You can also contact some investors who are known to do so and are usually successful entrepreneurs who want to contribute to the development of the entrepreneurial ecosystem. Note that some specialize in certain sectors.