Who are these famous business angels and how can you successfully finance your business thanks to them? If it is known that they actively participate in the financing chain, especially where this is not necessarily very effective, it can be useful to map the contours of their interests.
Business Angels (BA): Who are they and what do they finance?
They are usually natural persons, but can sometimes invest through a legal structure. Normally they invest some of their personal money in an innovative company with potential. This participation is accompanied by an equity investment.
The difference with other types of asset managers
BAs do not have a third party to whom they are normally accountable. Therefore, they are less hesitant to take strategic risks than a finance company that is under pressure from its shareholders. They therefore often take more risk than other types of investors, knowing that they are aware that they could lose their investment.
In France, the financing of company creation remains largely provided by the CAs. Their minimum financial contribution is 5,000 euros. The average amount invested is between EUR 100,000 and EUR 500,000 for a group of BAs. The BAs don’t just make money: they support the entrepreneur in the development of the business by giving him advice and opening his address book. Giving the entrepreneur a bit of their time, their skills, their enthusiasm for the project and a valuable external perspective is also the role of the BA.
The other point of view
The BAs hold an average of 15 to 45% of the capital and almost always remain minority shareholders. They do not intervene directly in the management of the company, as they often want to protect their personal assets. On the other hand, by integrating the board of directors, they can exert a very strong influence on important strategic decisions. Namely: they are never paid for the services they provide to the company.
Business Angels are prone to:
- An entrepreneur and a quality team.
- Product/market fit.
- The ambition of the project: the BAs are usually only interested in innovative projects or projects with a substantial development ambition.
- A long-term outflow of capital. The aim of the CA is not to keep its shares in the capital of the company forever (min. 4/5 years and max. 6/7 years).
- Realize an interesting added value when resale.
- Proximity: They generally want to be able to meet the company easily.
- Degree of maturity of the project: they generally expect that the market study has already been carried out.
- Knowledge of the sector of activity: or the understanding of it to be able to estimate its potential and provide the entrepreneur with useful support.
- A good concise and accurate summary of up to 4 pages (usually at the beginning of the business plan)
- An entrepreneurial adventure, a passion to participate in.
- A sense of supporting the dynamism and job creation in their region.
- Tax exemption for part of the ISF thanks to the TEPA law or the tax reduction law (25% SME).
Where can you find Business Angels?
There are many local associations, but the France Angels association brings together most of the Business Angels (BA) networks. You can also contact some investors who are known to do this and who are usually successful entrepreneurs who want to contribute to the development of the entrepreneurial ecosystem. Note that some specialize in certain sectors.