How long will my money be tied up?
You should not invest without considering that your finance can be tied up for several years in companies that you have invested in and that they may need more than one round of investment to achieve successful growth, although you should work toward an exit in an appropriate time scale. Remember Angel investing is often called “Patient Capital”! For more information, CLICK HERE.
How does Angel Investing differ from VC investing?
Angel Investment differs from Venture Capital finance which invests in businesses through managed Funds, raised with private or public money. The venture capitalist manager invests the money on behalf of the Fund which has to be profitable and make a return for the fund’s investors. Due to high costs of administration and the need to be very selective to ensure a return on the fund, VC funds are more risk averse and thus make fewer small investments in start and seed stage. So business angels are becoming more and more significant in funding new ventures by supplying smaller amounts of capital to companies that cannot be economically funded by the established venture capital market.
Business Angels differ from venture capital firms not only in the size of their investment, but also in their approach. Angel investing is often called “patient capital” since angels are less concerned with rapid return and exit and are prepared to support the business through its path to growth and exit over a longer time scale.
How is it different from Venture Capital Trusts?
VCTs are designed to encourage individuals to invest indirectly in a range of small higher-risk trading companies whose shares and securities are not listed on a recognised stock exchange. These are also operated by a Fund manager who takes the decisions about the investments on behalf of the investors and makes investments in a number of companies. The individual investors are not engaged in the decision about the selection of the business which investments are made and are not involved in the ongoing support and growth of the business. CLICK HERE.
Unlike investing in a managed fund, Business Angels make their own decisions about investments they make and generally engage directly in meeting the entrepreneurs, often seeing them pitch their business. Angels also engage directly in the due diligence and investment process, and are signatories on the legal investment documentation. This can be done either on their own or with a syndicate. Angel investors then follow their deal either actively or may act passively as part of a group with a lead angel taking this role on their behalf.
