Business Angel is a private venture investor, philanthropist, who provides financial and expert support for startups in the early stages of development.
Historically, business angels are the main source of external financing for new companies with the potential for rapid growth. They help startups to move beyond the stage when the volume of resources required for development exceeds the capacity of the founders, but it is not large enough to interest an investment fund. Angel can invest not only in the finished project, but also in the idea that it is impossible for an institutional investor.
The concept of "angel" was formed in the theater environment of New York at the beginning of the XX century. In the Theater District around Broadway, the wealthy theater fans who invested in new plays were called "angels". They were attracted by the patronage of art and close acquaintance with eminent actors and directors. Investments were risky, the "angel" made a profit only if the play was successful. For private investors, this term was first used by William Wetzel, a professor at the University of New Hampshire in 1978. This feature was provided to wealthy men with entrepreneurial and managerial experience, who non-publicly invested in local companies in the early stages of development.
Business angels existed long before the term appeared. For example, in 1874, Thomas Sanders and Gardiner Green Hubbard became investors of the telephone company Alexander Bell, and a few years later they made a successful “exit” from a successful project. In 1878, entrepreneurs John Pierpont Morgan and Spencer Trask funded Thomas Edison's development in the field of electricity. Henry Ford attracted 40 thousand dollars from five private investors to start the company in 1903. Stanford University’s Vice President Frederick Terman invested $ 538 of personal funds in the development of the oscillator of William Hewlett and David Packard.
Business angels have played a role in the formation of many modern corporations. Richard Kramlich was the first who invested $ 22,500 into the Steve Jobs and Steve Wozniak’s venture, the future Apple corporation. Anita Roddick, the founder of Body Shop, was unable to get a loan to open a second store in 1976, and car dealer Ian McGlinn invested £ 4,000 in her business in exchange for half of the company. In 1995, Jeff Bezos attracted $ 981,000 in investment in Amazon from 20 angel investors. The founder of Sun Microsystems, Andy Bechtolsheim and Stanford University professor David Cheriton, who invested $ 100,000 in the company, became the first investors of Google. Microsoft, Dell and Intel received support from business angels at the very beginning of their development.
Angelic investments are often described as "smart money": angels are more likely to support projects in which they can apply their own experience. Personal engagement and expertise is the fundamental difference between business angels and other private investors. Among active business angels there are many entrepreneurs who have attracted external financing in their own projects.
More information: startup.forum-expo.org
