Where, how and why to find business angels

The average amount brought to a business by a business angel in the Hauts-de-France is €20,000. ^[1] This is often the essential support required to turn a business idea into a reality.  On average this represents a 20% stake in a company’s capital.^[2]

Business angels provide invaluable financial support when listing on the stock exchange is not possible and borrowing from the bank is too expensive. Support from this type of private investor could make all the difference to the success of your business project in the Dunkirk and Hauts-de-France area. In saying that, an inexperienced entrepreneur or one who is not well connected could be hesitant when it comes to what steps to take.

How do I find a business angel? What are the reasons to turn to this source of financing? A specialist in business support and for project leaders in Maritime Flanders, Dunkerque Promotion gives you everything you need to know to carry out your search for investors. 

What is a business angel?

A business angel, sometimes called an angel investor, is a private person who invests a share of their personal money to fund a business.

This type of investor has a range of profiles. Nevertheless, more often they are:

• A former company director wishing to provide help to a new business project
• A family member of the funded entrepreneur
• Another wealthy individual wishing to diversify their assets into high yield investments.

A business angel tends to invest in fledgling entrepreneurs, that is to say, start-ups or SMEs with a strong potential for growth and in the process of raising funds. It is an important source of capital for some innovative companies that are still not listed on the stock exchange. As a matter of a fact, a business angel’s contribution is often decisive when it comes to replacing or complementing other sources of external funding such as:

• Bank loan
• Microcredit
• Subsidised loan
• Lease, etc.

The sum invested can contribute to:

• The initial setting up of the company (constituting company capital, set-up costs, etc.)
• An innovative business project (experimental prototype development, research and development budget)
• A commercial development project (design or distribution of a new product, marketing campaign or new service, etc.).

Why should I turn to a business angel?

Just like any funding strategy, resorting to a business angel has its advantages and disadvantages. For an entrepreneur, it is important to have a good understanding of the implications this approach will have on the future of your project

What are the advantages of a business angel?

The main strength of a business angel is financial. This investor is not an angel for no reason: as a matter of fact, they provide the capital necessary to make a business project viable and allow it to develop.

• This source of funding is cheaper than a bank loan, as the company does not have to pay interest.
• It is also simpler and less regulated than a public offering and, a fortiori, than listing the company on stock markets.

A business angel’s contribution is, nevertheless, rarely limited to the purely economic side of things. As an experienced investor, they also play a facilitating role and will often be in a position to offer:

• A very wide network of professional contacts in the company’s area of business (ideal for recruiting or snapping up very specific expertise) or in public administrative bodies.
• Their own professional experience, as many business angels tend to fund projects in sectors where they have already had a long career as a company director.
• Their advice on steering a project, financial management, human resources, etc.
• An initial client portfolio to launch the company’s commercial activity.

What are the disadvantages of a business angel?

A business angel’s equity stake gives them some decision making powers in the company, and thus reduces the business owner’s control over their own company. Their investment actually constitutes an acquisition of interest. The business angel will acquire shares in the company’s capital or stock in proportion to the amount of their contribution, and thus have a say in its management. A business angel typically benefits from a seat on the board of directors.

The investor’s advice and active help can also be seen as intrusive for the company director.  In practice, each relationship is unique and a business angel can have a varied level of involvement.

In addition, the business angel primarily remains an investor and logically they will expect results. The entrepreneur should not underestimate the extra pressure this creates or the requirement to provide regular reports.

Finally, business angel funding is relatively volatile. These investors often intend to sell their shares over the medium or long term to make a capital gain.

Boxed text: Business angels: a temporary investment

Business angels are rarely content with funding a single project during their lifetime as an investor, and often adopt a buy-sell strategy. On average, an angel investor resells their company shares in about five years^[3] , which is a relatively short time for a young company seeking funding.

Where and how do I find business angels in France?

An entrepreneur seeking private investment can find their business angel in a number of ways. The easiest way, if they have the chance, is to use their own network of contacts and acquaintances in the professional world.

There are more formal organisations for project leaders who do not have so many names in their address book:

• The National Federation of Business Angels or “France Angels” is responsible for maintaining a legal and financial environment that is favourable for business angels in France, and for organising how they connect, too. It currently brings together 5,500 business angels across 64 local or professional^[4]
• Chambers of Commerce and Industry (CCI) can also provide useful contacts and they organise specialised trade fairs to help entrepreneurs and investors to meet. These events provide the entrepreneur with a space to encounter a number of potential investors over a short period of time and to convince them face to face.

Some events can then give the young, innovative entrepreneur sudden visibility and attract investors. Taking place every year, the Concours Lépine in Paris and its European cousin in Strasbourg must also be mentioned as showcases for pure innovation projects. Other start-up contests or competitions are regularly held to help the best projects and economic models to evolve and receive funding.

Boxed text: If you want to attract a business angel, then don’t leave anything to chance

Basic tips for requesting a professional bank loan apply a fortiori to convince a private investor. Give utmost consideration to your business plan and executive summary. It is important to come across as convincing and highlight your company’s potential for growth.

Finding business angels in the Hauts-de-France

Around 50,000 new businesses are created each year in Hauts-de-France. ^[5] They all belong to project leaders who sometimes face difficulties in securing funding and launching their business. Fortunately, the region stands out for its particularly active business angel network.

The Business Angels Nord de France is a member of France Angels. It is supported by reliable financial partners such as the private bank JPM and the Invest Innove network. Based in Croix, the main aim of the association is to put investors in contact with new companies in Lille and the rest of the Nord area.^[6]

Businesses seeking funding solutions in the area of Maritime Flanders can also turn to Dunkerque Promotion. It offers a comprehensive financial engineering service including identifying, applying for and securing public or private financial support.

The tasks it carries out also cover other areas:

• Researching land opportunities where you can set up your company
• An interface with public authorities
• Help with recruitment and training

Business angels play an important role in the economic life of companies. Although they are less common in France than in certain foreign countries, they can, nevertheless, make all the difference when it comes to the success and failure of a business project.

Don’t let a lack of contacts stop you from accessing this interesting source of funding.  Dunkerque Promotion is here to help you in your quest for an investor for your business in the Dunkirk region and throughout the Hauts-de-France.

Key points to remember:

• A business angel is an angel investor who not only provides a fledgling company with their money, but also their network and know-how.
• This acquisition of interest gives the start-up the necessary funding to innovate and fund its initial years of development.
• Numerous networks and institutions can help you to find an investor interested in your project.

^[1]        https://entreprises.hautsdefrance.fr/Le-financement-par-un-Business-Angel

^[2]        https://entreprises.hautsdefrance.fr/Le-financement-par-un-Business-Angel

^[3]              https://entreprises.hautsdefrance.fr/Le-financement-par-un-Business-Angel

^[4]        https://www.franceangels.org/

^[5]              https://www.insee.fr/fr/statistiques/4475836?sommaire=4476010

^[6]        http://www.businessangels-ndf.fr/nos-partenaires/