Business angels: history of emergence and investment objects

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Business angels: history of emergence and investment objects
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Business angels – this is a romantic name given to people who seek to invest their own money in various innovative developments, as well as in projects that, in their opinion, have a promising future.

Their task is to help and support young organizations that introduce innovations into all spheres of life. It turns out that they invest their own money and can count on owning a significant share of the business, for example, a block of shares.

Let’s consider what business angels are, what they do, where they invest money, and what capital they own.

History of appearance

Investors of this category were first mentioned in the 20s of the last century. Rumor has it that this was the name given to wealthy individuals who patronized new projects, sponsoring art exhibitions, theatrical performances and other cultural events. There is another direction in the history of this era.

It is believed that the name was first used in relation to private investors who invested their money in promising projects in Silicon Valley.

The first person who was helped by such a business angel was Eugene Kleiner, who found himself in a difficult situation on the way to realizing the idea of ​​​​manufacturing microcircuits from silicon. He had to spend a lot of effort searching for an investor, and he was already ready to give up this idea, when on his life’s path he met Arthur Krok, a man who had enormous financial connections and major influence. As a result, the missing monetary value was found, and in 1959 the company Fairchild Semiconductor was created.

Investment objects

Historically, these types of angels have acted as a source of external funding for organizations with high growth potential.

Business angels
Picture: bankrate.com

They provide assistance in creating startups to overcome the latter stages when there are not enough resources for the development of activities. They invest money directly and can operate with their own capital. Investment can be made not only in the project, but also in the main idea. The portfolio of these specialists is dominated by investment funds, both in quantity and in total volume.

A portrait of a business angel in the classical Western sense looks like this:

  • a man with a university degree;
  • over 45 years of age;
  • has managerial experience;
  • constantly learning expert knowledge.

If you are looking for options on how to find a business angel, it is worth familiarizing yourself with the areas of activity of these specialists.

The difference between a business angel and an ordinary investor

The goal of any investment is to achieve a fairly good income; if we are talking about venture investment activities, it should have the maximum value, since the risk of losing the invested money is high.

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Classic investors cannot always decide to place their capital in new and risky projects. They prefer investing, which implies receiving a lower, but stably guaranteed income from ready-made business projects.

As for modern business angels, they strive to invest in innovative projects, in enterprises that are in their infancy. Traditionally, such a specialist selects several projects that he likes and focuses mainly on those that are more profitable from his point of view. They usually bear 100% risk.

Types of business angels and their opportunities

Corporate entities

These are private investors who use money received as compensation during the dismissal of a top manager within a large corporation. In the company in which they invest, these specialists tend to count on a leadership position. They take part in at least one project and have savings of up to $1,000,000.

Angel Entrepreneurs

This is the most active category of businessmen who strive to invest considerable amounts, usually up to $500,000. As a rule, they are successful themselves and are looking for ways to make their investment portfolio as diverse as possible and their business broader. They do not hold any position within the investee organization.

Business angels
Picture: avaloq.com

Enthusiasts

Compared to the previous group, this category of specialists is less experienced and professional. Such people, having crossed a certain age, begin to consider investing as a hobby. It is clear that they invest small amounts of money, from 10 to several thousand dollars, and take almost no part in management processes.

Managers

These investors contribute to the implementation of strict and strict control of their own investments. They participate in the organization’s board of directors, although they do not go to work every day. Traditionally, they prefer to provide financing to several companies at the same time, adding significant “weight” to them.

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Professionals

In this case, investors are specialists of a certain profile. These could be investors, lawyers, doctors, auditors and accountants, and so on. They prefer investing in companies that offer a product or service that is relevant to their professional activities.

In addition to investments, such investors provide expert assessments and help in analyzing activities. Where to find a business angel – read and find out within the framework of this material.

Advantages and disadvantages of cooperation with angels

  1. The main advantage of these people is that you can turn to them without risking as much as in the case of banks.
  2. They, unlike classical commercial banks, are ready to provide funds for development and starting a business.
  3. Another advantage is that these specialists can participate in activities and provide advice at a professional level.
  4. They provide support in all directions, since they are directly interested in the dynamic development of the business.
Business angels
Picture: forbes.com

If we talk about the negative sides, they are also obvious. Excessive participation of an angel in the business process deprives the aspiring entrepreneur of creative initiative and complete freedom.

Projects helped by business angels

Many of the things we use today might not have been created if not for the help of the people discussed in the article. The following projects are included in the investment portfolios of the largest business angels.

  • ALIBABA;
  • WHATS APP;
  • Centro Bit;
  • IRATES.

This is not the entire list of projects in the creation of which business angels took part. In this regard, we can conclude that their role within the business market is quite large.

The first investors who learned to make money by helping other budding entrepreneurs appeared about 100 years ago in the USA. They also contributed to the development of the first IT projects.
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