Business angels are individuals who, like ‘angels’, invest their capital in promising start-ups in exchange for shares in the start-up, becoming partners and taking on the risks associated with its development. They usually tend to concentrate their investments in the early stages of a company’s life (pre-seed, seed), eventually participating in later rounds.
Often they are retired professionals or managers who have specific knowledge in the sector in which they want to invest, so they tend to play an active role in the management of the business in most cases: in order to mitigate the risk, the business angel helps the entrepreneur in his journey by applying his know-how gained through years of experience.
Among them we can distinguish professional investors, who differ from other business angels in the number of investment operations carried out, the amount invested and the business management skills they possess.
Business angels can also be part of a Business Angel Network: a network of investors located in a specific geographical area looking for promising potential start-ups. In Italy, the main groups are the Italian Business Angels Association and Italian Angels for Growth: non-profit associations that put their members in contact with start-ups, supporting innovation and entrepreneurship.
The main advantage of participating in a Network is that, operating as a Venture Capital investment fund, one can achieve higher investment volumes than possible privately, even in more mature and consequently less risky companies. Networks also offer numerous investment opportunities with reduced due diligence costs, allowing members to diversify their investment portfolio by sector and/or geographic area. Other advantages are related to the screening of projects by the employees of the association, which guarantees the investment in the most deserving ones, also supporting the business angel in case problems arise.
Members of these associations can also take part in various meetings and workshops on market trends and investment techniques, enriching their skills and sharing their experiences.
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The BizPlace team