Business Angel

What is a Business Angel?

A Business Angel  or Private Investor is typically a high net worth individual who invests on his own, or as part of a syndicate, in businesses where there exits an opportunity to make a return on his capital.  Business Angels operate in the SME sector – small to medium sized enterprises or businesses with turnover from zero to £20 million.

They are frequently entrepreneurs or executives, who primarily invest for financial reasons, however other reasons for wanting to invest include wanting to keep abreast of current developments in a particular business arena, mentoring another generation of entrepreneurs and making use of their experience and networks on a part time basis.

Therefore, in addition to funds, angel investors can often provide valuable management advice and important contacts. This is particularly relevant in the so called turnaround market, where additional experience and management expertise can be as important as the capital required for the business.

Finally, some terminology. Business Angels, Private Investors, Dragons, Investment Entrepreneurs are basically all one and the same. All seek opportunities to invest in businesses, putting their own money into the business in return for shares.

How long will the process take?

As we are all aware that time is critical, our whole philosophy is based on searching and locating potential investors rapidly. Initial meetings with potential investors can be had within one week of instruction, and if successful, offers for funding made soon after. Equity funding can be completed within 28 days in the quickest cases.

How much can the investor inject?

Investors typically will consider investing between £50,000 and £2 million. In addition to their own capital, investors may bring banking support either from their own sources; or by introducing new capital and their experience to the business, revitalising the businesses existing banking relationship.

Investors are usually prepared to invest across most industry sectors and at all different stages of business development.

Does my business qualify for Private Investor Funding?

This can be a complex question, however the most straightforward and correct answer is always this: If my business, with the right capital, can have a sound and prosperous future then I qualify.

Will they be active or passive investors? Will they seek a full time role in the company?

Many investors will have specific sector experience and may wish to be “hands-on”. In some cases this should be welcomed, however it is unlikely that the investor will want to take over the business. He or she may look for a majority stake whilst the investment is at risk, however we have found that in most of these instances majority ownership will revert back to management once the business has been put back on a sound footing. In other cases, investors will seek only a small minority stake – it purely depends on the circumstances of the investments and the current health of the business. Other investors are happy to be passive, particularly if an element of security can be offered for their risk. It should be stated that investors do not, as a rule, ask management / current owners for any personal security.

Is my own position secure?

Investors seek to back the business and its management; if they wanted to buy the business, they would by definition not be business angels. Again, there are no fixed rules – some management may need changing, active investors may require the role of Managing Director or Finance Director, in other cases there may be nothing wrong with the management structure, just a lack of resources and in these cases it would be unusual for the investor to take any more than a non-exec role.

What exit route would they prefer and what is the usual timing of this?

Exit routes and timing of exits are difficult to define. Investment may come in the form of a loan or equity or a mixture of the two. Investors may underwrite bank borrowing allowing for additional working capital. There are so many ways in which a new financial structure for the business may be put in place that the timing of a desired exit can be anything from 6 months to 5 years.

What is the next step?

Beer & Young Limited has developed a network of more than 1000 business angels who will genuinely consider investments into troubled businesses. That is not to say that raising funds is easy – far from it. However, we are one of the few firms to have a successful track record of raising turnaround equity finance. We are completing on projects every month of the year. The key to most projects is actually not whether we can introduce the right investor for the business – in most cases we can – it is whether terms can be agreed between the business owner(s) and the investor. This is a process that evolves over a period of days and weeks.

Successful funding in the turnaround market is as much about personalities as it is the straightforward terms of the investment. It is about entrepreneur and investor sharing the same vision for the business and agreeing a plan forward as much as it is about how much capital is required and for what stake in the business.

If you feel that your business could benefit from an injection of new capital, please contact us for an initial, informal discussion. We are experts at raising recovery finance and will offer an honest assessment of what can be achieved in your circumstances.

All discussions are completely confidential and, of course, without cost or commitment.