Who are business angels?

They are natural persons who invest private money in a business enterprise in its early development phase which is characterised by a big growth potential. Business angels become shareholders of the enterprise by supporting its development with their capital, experience, knowledge and contacts. Business angels are very important in development and functioning of the capital market. Thanks to them, entrepreneurs can overcome the so called equity gap which is the biggest obstacle in development of ambitious and innovative projects. The equity gap is the lack of funding for companies in their early development phases. This obstacle is encountered by entrepreneurs who already used up all their private start-up funds but haven’t been in business for long enough to apply for banking financial products or the capital of institutional investors such as joint venture funds or private equity. Many interesting and distinguishable business ideas stop developing because of capital limitations, and remain small, local businesses.

How is this profitable for business angels?

Business angels invest only in those projects which are able to develop an uncovered niche on the market and thus generate large profits.  The profit rate should be ca. 30% per year. (We are talking about average annual return. This means that in the first years of investment, an angel can suffer losses but after 5-7 years the company can be sold for a large profit.) This is a lot but innovative companies in their startup phase are very risky investments and many of them end up as failures. A large profit rate from one project compensates for failed investments which every angel takes into account.

Are business angels interested in the creative sector?

That depends how you define the creative sector. Every investment project which has the potential for dynamic growth is attractive to business angels. The most popular sectors among the angels are IT and biotechnology, but discovering a niche on the market is what counts so every branch has a chance.

How can one win over a business angel?

There is no recipe for that but surely the business idea should be very precisely thought-out and thoroughly described in a business plan. It is best to start with a project advertisement in the Guild of Business Angels. It can be easily done via our website – www.aniolybiznesu.org. We rate these projects – Guild’s experts are economists and engineers with investment experience. We make the best ideas available to business angels registered in GoBA.

How can I be certain that an idea I submitted won’t be used without my participation?

Not every investor who registers in our network is given access to the projects. We carefully check the potential business angels. We sign cooperation contracts only with those whose business successes raise no doubts and have a very good reputation in the business environment.
How big of a support can a person submitting an idea get?

In Poland, business angels invest a maximum of 1,500,000 mln zł per project and a minimum of about 100,000 zł.

Do business angels also support organisations?

Business angels become shareholders of the partnerships in which they invested. They actively take part in managing it as members of the board of directors or the supervisory board. An idea can come into existence in an entity that is not a partnership but if a business angel invests in it, a partnership will have to be created, usually a limited liability company.

To what degree can an investor interfere in my company’s development?

That depends. These matters are regulated by the partnership contract. Usually, a business angel wants to be able to influence key decisions like incurring liabilities above a set amount or employment.

So what does the procedure of matching an innovative project with a potential investor look like?

First, we, as the Guild of Business Angels, rate a project. We make the best projects available for business angels. If an angel decides to invest in a given project, we can help with negotiations of the investment contract with our legal or financial consultancy.

How long does this process take?

It’s a very individual matter. Rating a project takes us usually 2 weeks and an angel’s decision is an individual matter. Negotiations usually last for several months. It does not depend on us but on the project originator and the investor.

What if I have a great idea but I don’t know how to create a good business plan? Can I count on your help?

We don’t help in writing business plans. We regularly organise training courses for project originators that teach them how to describe and present an idea to a business angel. Soon, virtual courses in this field will be available on our website.

What should a good business plan contain?

Business plan is a very complex document. The most important pieces of information that should be included are: a description of the company’s business, product description, description of resources (staff and necessary equipment), market and competition analysis, risk analysis, result forecast, and marketing and sale strategy. Registering a project in our system facilitates preparing and submitting a business plan because the system is divided into appropriate sections in accordance with the structure of a business plan.

Does a business angel reserve the right of investment exclusivity or can I simultaneously look for other sources of funding?

The partnership contract describes the ownership structure. It can’t be changed without shareholders approval. Additional sources of funding like credits are allowed if they are consistent with the company’s financial strategy.

In which stage of development can I count on a business angel’s help?

Business angels invest in companies in their very early phases of developments, so called startups. These are companies that were only just created, are not profitable yet and often bring losses. Usually, a business angel is the only source of funding for them.

Are specific organisational structures required or can a company’s team be in development?

Projects that already have certain structures and in which project originators invested their money usually receive better ratings.

What is the Guild of Business Angels project about?

The Guild of Business Angels is a network of individual investors. We look for interesting business ideas, rate them, choose the best ones and recommend them to our business angels. Apart from that, we organise training courses for entrepreneurs and business angels.

Is such project needed? Isn’t a business angel and a man with an idea enough?

It’s not easy to find a good business project. Looking for business opportunities alone is very time-consuming and yields poor results. An investor who searches for interesting business plans must be aware of the fact that statistically only one in ten will be notable. The network of business angels allow investors to filter projects and rate only the selected ones. This way they save time and thus –money. And the project originators have the certainty that their projects will reach only reliable investors. The Guild of Business Angels is a project financed from EU funds and it is free of charge for both business angels and project originators.

The head of the Guild of Business Angels, Zbigniew Wiatr, was interviewed by Agnieszka Gernand and Maciej Mazerant