Early Sources of Funding (2): Business Angels

Colin Mason, Tiago Botelho

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

Business angels are private individuals–predominantly cashed-out entrepreneurs–who invest their own money in new and early-stage businesses and, having invested, then draw upon their own business experience to support these ventures in a variety of ways. As such, they are often referred to as informal investors, or informal venture capitalists. Whereas the attention of scholars and the media is largely focused on institutional venture capital, business angels actually finance substantially more businesses, although their investments are much smaller, hence the overall amount they invest is smaller.

This chapter will examine the role that business angels play in the financing of entrepreneurial ventures. It starts with a consideration of definitional issues–who are business angels? The shift in the nature of angel investing from being a largely invisible and individual activity to one that is increasingly organized into visible groups is then discussed. This is followed by a review of the types of investments that business angels make. The remainder of the chapter examines how business angels make their investment decisions and the key criteria that they take into account in their investment decisions. This discussion is structured around the stages in the investment decision–deal origination, initial screening of opportunities, detailed evaluation, negotiation and contracting, the post-investment relationship with the entrepreneur and the exit.
Original languageEnglish
Title of host publicationEntrepreneurial Finance: The Art and Science of Growing Ventures
EditorsLuisa Alemany, Job J. Andreoli
Place of PublicationUnited Kingdom
PublisherCambridge University Press
ChapterChapter 3
Pages60-96
Number of pages36
ISBN (Print)9781108368070
DOIs
Publication statusPublished - 27 Sep 2018

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