The Essential Role options for Effective Angel Investment

Angel Investment

The role of the Angel Investment network is extremely important for the followings, have easier and broader access to more interesting and original files, a network being a regional point of attraction for entrepreneurs looking for funding, share skills and expertise with other business angels, analyze and study files with several business angels thus reducing the risk of error of judgment on the files and contractors, invest in the same project with other business angels, which allow either considering larger projects, or to invest in a larger number of projects and thus reduce individual risks.

Angel Investment

Different legal structures

Associative networks:

These structures are dedicated to connecting entrepreneurs with investors. Generally, the structure provides for the monthly organization of meetings to present selected projects to an audience of potential investors. These devices are mainly dedicated to projects requiring small amounts often less than 200.000. Business angel adheres to such a network by paying an annual fee. The network pools its expertise with the other members of the network and makes its own decision to invest, or not, in the projects presented.

SIBA

Business Angels Investment Company: The creation of these investment companies can serve two purposes. On the one hand, some Business Angels especially in small numbers, from 10 to 20 wish to remain between them without seeking a strong regional visibility. They then agree to put their money in a common pot. In addition, certain networks wish to acquire, in parallel with the associative structure, a SIBA allowing them to supplement the investments of individual BAs. Creating an investment company requires strict operating rules board of directors, chairman and investment decision investment committee. It imposes a rather rigorous discipline on its members but is very efficient in terms of quality and speed of decision but also of investment capacity.

The flight of crowd funding

Crowd funding is a way of funding projects by the public. This mechanism makes it possible to raise funds from a large public via, most often from an Internet platform.

In terms of investment, it can take two forms:

  • Paid loans, or crowd lending,
  • An equity investment, or equity crowd funding.

The number of crowd funding platforms proposing to connect, on the one hand, project promoters in search of funding and, on the other hand, the public, explodes in France. These initiatives, which offer new forms of financing, can adopt different schemes and offer services with variable geometry. Before committing, the individual wishing to participate financially in a project must understand what is proposed to him, what he is entitled to expect and the risks associated with his participation in the proposed project. Crowd funding presents specific risks. These risks include:

  • A risk of loss of all or part of the invested capital or funds lent, particularly in the event of difficulty of the issuing or borrowing company,
  • In the case of unlisted securities, difficulties in knowing the value of the sale of the securities as well as a lack of liquidity of these securities generating difficulties in selling them even though a holding period would have been recommended at the time of the subscription,
  • The lack of deposit of funds with a controlled institution and the risk of diversion of payments made through the platform,

No guarantee as to the allocation of the funds collected with regard to the initial project. Individuals wishing to participate financially in a project must learn, before committing themselves, about the nature of the proposed transaction as well as the obligations on the crowdfunding platform and the project leader.