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Behind the scenes of today’s business world, business angels are taking on an increasing role.

It is the word “backstage” that explains the way business angels work, and that is secrecy. As such, they are difficult to identify and track over time.

Business angels are informal individual investors who use their business experience to advise young companies and entrepreneurs and help their future growth. They primarily invest in sectors they understand and in a region, they know. The most common reasons why business angels invest are profit, encouraging entrepreneurship, business activity, and also fun in creating new value.

Angel investors are individuals who seek to invest at the early stages of startups. These types of investments are risky and usually do not represent more than 10% of the angel investor’s portfolio. Most angel investors have excess funds available and are looking for a higher rate of return than those provided by traditional investment opportunities.

Angel investor

About Business Angels

Although the population of business angels is very diverse, their profile is not difficult to describe.

Based on numerous studies in different countries it has been found that most business angels, about 95%, are men whose age ranges from 45 to 65 years. Because they are business angels individuals who have managerial experience, their age is not surprising.

The concept of business angels as a powerful source of financing for high-growth companies has appeared in recent decades in the United Kingdom and Europe and is growing rapidly in other regions around the world. Following the recent financial crisis that has shaken economies in many countries, they play an important role in the financial gaps left by banks and venture capital firms. 

How Much Value Do Business Angels Provide?

They were generally helpful in overcoming funding gaps for fast-growing small firms. They also assisted the management of such firms with knowledge and experience by providing time on the firm’s board. In addition, these angels were useful in their ability to help widen the range of contacts and networks that the firm needed to secure additional capital and follow-on financing.

Business angels: what are they and why are they important?

Business angels’ investments can be both early-stage and expansion and they can have a leveraging effect for other sources of funding, including bank loans and formal venture capital. Though angel investing has both its advantages and disadvantages, it is widely agreed that the advantages of business angels generally outweigh their disadvantages, making an active informal venture capital market a prerequisite for a vigorous enterprise economy.

Angel Investing vs Venture Capital

A venture capitalist is a person or firm that invests in small companies, generally using money pooled from investment companies, large corporations, and pension funds. An angel investor is an accredited investor who uses their own money to invest in usually small businesses that are just starting out. 

They choose businesses that they are interested in and can see becoming profitable, even if the company has not proven itself yet. Because of this, angel investors take more risks than venture capitalists.

Another difference between angel investors and venture capitalists is the amount of business capital both investors are willing to offer.

VCs invest more money into businesses than angel investors. According to the Small Business Administration, the average venture capital deal is $11.7 million.

The average angel investment is $330,000 according to the SBA. While venture capital tends to be invested in the millions, angel investments are in the thousands.

How to Decide Between Pitching to a Venture Capitalist vs. Angel Investor

Due diligence is an environment that has given angel investors much controversy over the years. Many angels do almost no work, and because all wealth is their own, they’re not really obligated to do so. Capitalists must do more due diligence since they keep their restricted partners’ fiduciary responsibility.

Angel Investors vs. Venture Capitalist: 7 Main Differences

Angel Investing in Croatia

The Croatian Network of Business Angels (CRANE) is a non-profit association that brings together private and institutional investors interested in investing in innovative companies at an early stage of development. Umbrella is also the oldest organization of business angels in Croatia and one of the most successful organizations in Europe. 

CRANE is a member of the European Network of Business Angels – EBAN based in Brussels, which is the world’s leading organization of investors in the “Early stage” of the company.

Crane

Additional reading:

The Top Angel Investing Platforms for Entrepreneurs & Startups

Top 8 angel investor websites for startups in 2022

Pros and Cons of Using Angel Investors to Fund Your Business

Europe needs an angel investing revolution