What do angel investors do? How did they get to have such a nice name? And what kind of people are they?
We've heard that the term 'angel' first came from the theatre, about a hundred years ago. In those days, the wealthy individuals who supported productions didn't necessarily expect to make a profit, they were more like patrons of the arts who backed productions they believed in.
If you've seen the movie or play 'The Producers' you'll be familiar with the idea, and the comic potential of a theatre impresario who sells far too many shares of a production that he's certain is going to make a loss.
Coutts private bank has just published a very readable article about angels. Their key insight is this: Some entrepreneurs choose to help other companies succeed after they exit their own.
That is a very important characteristic of angels. These days, they aren't just people with money; they are entrepreneurs who have walked the walk and know how to help and mentor others. And they want to do it.
An angel investor doesn't just put money into your business.They give you their advice. A few months ago, we wrote about Gripit Fixings, where a teenage entrepreneur was smart enough to go into business with Deborah Meaden, of Dragon's Den fame.
An angel investor we admire is Mary McKenna, of Co. Donegal. Her blog is an excellent read, and has the excellent name Kicking Assets.
The UK Business Angels Association (UKBAA) estimates there are 18,000 business angels across the UK, investing an estimated £1.5bn a year. So what makes someone who has already achieved considerable success want to get involved in what may be a garage-based fantasy? “For a lot of our clients it is
Coutts tells us about their motivation:
“For a lot of our clients it is in in their DNA to want to invest in and support young companies”, explains David McKenzie, Market Leader for Entrepreneurs and South East England at Coutts. “They’ve more than likely been through it before with their own companies and often have more than just money to offer start-up founders. Their experience, knowledge and passion can make it a win-win situation for both entrepreneur and angel investor”.