To finance the establishment or development of his company, the project leader can call on a Business Angel photo credit: Shutterstock
The project leader can call on a Business Angel to finance the establishment or development of his innovative company. Knowing how to choose your future partner and being able to convince him are two essential conditions for guaranteeing the sustainability of the company.
Overview:
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What is a Business Angel?
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Networks of Female Business Angels in France
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Which Business Angel should you hire?
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How to convince the Business Angel?
What is a Business Angel?
A Business Angel is a person who invests part of his capital in innovative companies with growth potential (start-ups, SMEs) and who is looking for financing to create (priming) or develop their activity. In order to contribute to the success of the project and generate added value, the Business Angel follows the company, makes its expertise available, gives it advice and makes its address book available.
In general, Business Angels are grouped together in a network. The National Federation of Business Angels, France Angels, brings together 64 networks and individual Business Angels. Likewise, the EuroQuity company, founded by Bpifrance in partnership with KfW, connects project developers with more than 1,500 investors. The capital invested by multiple Business Angels averages $400,000 and rarely exceeds the $1 million bar, with each Business Angel contributing around $10,000 or $20,000.
Networks of Female Business Angels in France
Women entrepreneurs struggle to raise capital unlike men. According to the barometer of the Sista collective, conducted in 2021 by Boston Consulting Group (BCG), investors continue to favor male teams, which represent almost 85% of funded start-ups and more than 90% of the money raised in 2020 In addition, the share of start-ups founded by female or mixed teams has increased slightly compared to 2019 (4 points), but this is mainly due to this growing diversity within the founding teams. Faced with this phenomenon, women wanted to respond and created their own networks of Business Angels.
In France, a group of women founded the Femmes Business Angels (FBA) association in 2003. According to the association, “the aim then was to bring together the rare women who are present in the traditional finance world of Business Angels to encourage them and promote the active role of women in the economy and more specifically in entrepreneurship”.
In 2020, in a context of crisis, the members of the network invested 1 million euros in 20 innovative projects. “These investments are made based on criteria that combine economic performance, profitability, diversity and impact. Of the 20 projects invested, 30% are led or co-led by women and 35% are regional dossiers (Lille, Lyon, Marseille, Toulouse, Grenoble, Nîmes). The vast majority of investments in 2020 will be early rounds, 6 of which will be refinancing.”
In recent years, associations have also developed in Europe, such as Women Business Angels for Europe’s Entrepreneurs or WomenWinWin. They are all aimed at strengthening female entrepreneurship and supporting women who want to develop their businesses.
Which Business Angel should you hire?
Everything depends on the nature of the project being carried out by the innovative company. The aim is for it to be supported both financially and strategically. It is therefore advisable to contact the Business Angel active (or approaching) in the same sector of activity, as he already has expertise, will identify the intended project more quickly and will be able to convince himself more easily of its potential. The Business Angel who owns a share (even as a minority) of the company’s capital is the decision maker. That is why it is advisable to surround yourself with a person who wants to achieve the same goals, with whom a relationship of trust can be built.
On a financial level, the company should contact a Business Angel who is able to meet its expectations: it is advisable to see how much previous projects have been supported.
As support needs to be provided during the implementation and development of the project, it is appropriate to give preference to a Business Angel at the local level.
Finally, the Business Angel must allow the company to expand its network. Being supported by a recognized network of Business Angels is a guarantee of credibility and a good business card to convince other financial partners.
How to convince the Business Angel?
Convincing a Business Angel takes time (several months). This requires communication, argumentation and persuasiveness. To be selected, the project leader must convince the investor of the feasibility and viability of his project. To this end, a file will have to be compiled in which the team, the project, its innovative character and its business model are presented.
From this stage, it must be demonstrated that the shareholders’ remuneration is guaranteed. If the project is interesting, the team will verbally support it in front of the members of a selection committee. If investors are enticed, the project will deepen and a period of negotiations will begin to determine the terms for investors’ entry into the company’s capital. Finally, the course concludes with the signing of a shareholders’ agreement confirming the financing.