Business angels offer more than money

Angels are often most effective as mentors, a new report has found

Although they are typically seen as financiers, business angels are at their most effective when they can influence the direction of the company, a new survey has found.

Research conducted by the Newcastle Business School surveyed 71 business angels and found that the most successful investments occurred when the investor had a say in the strategy of the business.

However, the study also found that investments were more likely to go wrong if angels became employees or a members of the management team, suggesting that investors should keep their distances.

Most do, as on average angels spend just one day a week in their investee company, the report found.

Interestingly, the report’s author Stephanie Macht says that money isn’t the only motivation for investors.

“Although two thirds of business angels said that gaining return on investment was important to them, more than half also said that the enjoyment of supporting the entrepreneur through their knowledge, skills and network of contacts was a strong motivation for investment,” she said.

“Using angels’ expertise and enthusiasm to advise the company strategically is clearly the best use of their time as opposed to getting them involved in day-to-day matters.” Angels usually have the experience to do this, as 72% have run or owned their own business before. However, past business experience doesn’t appear to influence their choice of industry as only 32% stayed where they had previously worked.

© Crimson Business Ltd. 2007


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