Chapter 4: The Role of Angel Funds in Early Stage Start-ups
Maurice Olivier INVESTING IN EARLY STAGE VENTURES Early stage ventures have a variety of crucial needs in marketing, technology, product development, leadership, human resources and, last but not least, financing. There are several types of investors who take an active interest in those ventures. At one end of the spectrum, individual angel investors (or ‘business angels’) dominate seed investing and play an essential role in start-up investing. Available statistics show that they invest in total as much as, if not more than, institutional venture capital (VC) funds – and are involved in many more venture deals. They meet many of the needs of early stage companies as a result of their willingness to invest small amounts, their ability to decide and react quickly, and the knowledge and experience in industry or functional areas of relevance that they can bring to bear. But they quickly reach their own limits in terms of their propensity to invest, time available and deployable expertise. Typically, angel investors would invest no more than €0.5 million in any single round of capital. In spite of the rapid development of active business angel networks, which aim to channel the angel investment process in an organized and more cooperative way, their mode of working remains highly fragmented and individualistic – leading to frequent inactivity and high turnover. Finally, notwithstanding their willingness to help, they are seldom able to deploy the full range of skills that are required by rapidly growing start-ups. At the other end of the spectrum, structured VC...
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