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What is a business angel?

Posted on 26 November 2018

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People with high capital who decide to invest in startups in order to participate in the company's future business. That could be a quick definition of a business angel. These angel investors have become a key piece in the puzzle of the entrepreneurial ecosystem. But do we know exactly what a business angel is? 

As its meaning says, business angels are private "angel investors" who decide to support ideas and provide smart capital to a project. Not only money, but also time, experience, knowledge and a wide network of contacts. Although everything is not as beautiful as it seems, nothing is done for charity, they look for something: a reward in the shape of profits and growth for the startup. 

A business angel does not have to be a physical person, they can also be legal. Sometimes they start collaborating with entrepreneurs just after the FFF stage (Friends, Family & Fools) and before seeking investment funds. 

The most important fact about a business angel is that its work goes beyond the simple fact of providing finance. On many occasions, their knowledge-transfer is more relevant than the money they are expected to invest. Its goal is to provide good advice to the business so that it is on the right way and that this initial idea can raise millions in future rounds of funding and why not become a possible unicorn. 

But who are they? The profile of this type of investor is a middle-aged man (80% are between 35 and 54 years old), who has been successful (CEOs, directors and managers predominate). Particularly significant is the presence of investors who have previously founded startups, according to a report by the Spanish Association of Business Angels (AEBAN).

And what are these guardian angels looking for in entrepreneurship? In other words, what kind of projects do they invest in? Information and communication technologies and software represent a good part of the investment, with 51% of investments, followed by media and digital content, and commerce and distribution as predominant sectors for Spanish business angels, as reflected in the AEBAN report. 

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