Angel investors, business angels, providential investors, informal private investors, are some of the terms with which the figure of the Business Angel begins to be known in Spain. Although the term “Business Angel” arises around the year 1920, when private investors began to risk their own money to save Broadway shows, this type of investor has always existed and his figure has been linked to business development.
Business angels are people who invest privately and directly, that is, without the intervention of financial intermediaries, contributing money and experience in the initial stages of business projects with the hope of obtaining significant profits at the time of divestment.
Business angels help fill the investment gap that exists when, with the amounts of money contributed by the developer and their associates exhausted, the project is still not attractive to venture capital entities, whose operating dynamics generally make them interested to enter later stages of the business, which entail a lower associated risk and greater financing needs. Rarely does a venture capital institution invest amounts less than € 500,000, while the amounts contributed by business angels range from € 15,000 to € 400,000. During 2003, 40% of the investments made by business angels in the United Kingdom were for amounts of less than € 30,000 and only one in four investments exceeded the figure of € 75,000.
Widely known in the US, business angels play a fundamental role in the development of their economy by financing innovative business projects, injecting their own resources in the early stages of business, in which companies, lacking guarantees and a risk-compensating history, they have very limited access to other sources of financing such as bank loans. The success of well-known companies such as Apple Computer, Amazon or more recently Google has been written thanks to the support that their entrepreneurs received from business angels who believed in them.
A differentiating aspect of business angels is their informal nature. Unlike the formal venture capital entities operating in Spain - management companies, funds and venture capital companies - regulated by law and subject to a process of authorization, supervision and control by the National Securities Market Commission, the Business angels do not need to meet any specific formal requirements to operate as such.
Possibly the most unique characteristic of business angels is the fact that their contribution to the business is not limited to the delivery of an amount of money but that they put their managerial skills, their business experience and their network of contacts at the service of the company., thus facilitating its development.
It is precisely this added value that makes the figure of the business angel a fundamental instrument to stimulate the creation of new companies, giving a differentiating bias to the euros contributed, which can be considered smart money.
Regarding the motivations that drive a person to act as a business angel, we must bear in mind that he is an investor and that as such he hopes to obtain a significant profit for the money contributed so that if the evolution of the business is favorable see widely compensated irrigation assumed and time invested. In this sense, the contribution of business angels differs from that made by relatives and close friends of the entrepreneur, known as trust capital or the 3Fs, whose main investment motivation usually responds to affective rather than lucrative issues, prioritizing the personal relationship over the financial one. Notwithstanding the foregoing, aspects such as social responsibility, commitment to the community,The fun and satisfaction of being involved in starting a business are also among the motivations of business angels when it comes to investing.
By way of conclusion, we can say that business angels are an instrument that facilitates the development of business projects, filling the financing gap that exists in the initial phases of the project, acting where hardly any venture capital entities intervene, leveraging the financial resources of the companies in which they invest and promoting the development of an entrepreneurial community.
