Understanding the Business Angel Investment Stage

Many inexprerienced entrepreneurs are unaware that Business Angels will only be with you for a short while!

That is, their role is usually to provide gap funding between friends and families and the professional Venture Capitalists.

Take a look at the graph and you can see where Business Angel investment fits – right between the founders start up capital (often from families and friends) and Venture Capital.

This means two things;

Firstly, Business Angel funding is only a stepping stone – it is not the be-all and end-all of funding.

Secondly, Business Angels will only be interested in your business if they think that VCs might also (later on) be interested.

Okay, some Business Angels will just review the business and back it or not, but nevertheless, it is important to remember that the most likely exit for the Business Angel is a Venture Capitalist.

Other exits for the Business Angel may be trade sales or IPOs, but nevertheless, to reach these later stages there is usually a requirement to raise more funds – often from Venture Capitalists – and yes, some Business Angels will stay with their investments – but equally, many will look to exit at this stage.

If entrepreneurs looking for funding understand and appreciate this fact, then they are more likely to win the confidence of the business angels and angel investors.