There is a very flowering type of investment in the Principality of Monaco, called Business Angel investment.
We refer as â€œBusiness Angels” to private investors who are investing small capitals into early stage or startup companies. Usually the average equity investment is between 50 000 Euro and 500 000 Euro.
In many cases Business Angels are investing into the idea, the concept and the persons behind it.
â€œBusiness Angels invests either individually or as part of a syndicate, in high growth businesses.”
What makes this type of investment very interesting is the excitement factor. Business Angels are usually looking for attractive financial returns, high growth potential and clear exit path. To achieve their investment aims often they are ready to take higher risks as well.
Comparing the past years statistics we can see that only one out of ten investments are able to bring a ten times capital invested. Meanwhile almost sixty percent of the investments fails to return the capital.
The risk is high, but the expectations are clear. The Business Angels are usually looking for ten times of their investment capital over a three years period.
When you spend time in the Principality of Monaco and you are interested in the field of investment, you can notice that every months there are various events dedicated to Business Angels. Many start-ups looking for additional founds are travelling to Monaco to make an often eight minutes only presentation to catch the attention of the Business Angels.
They know that the Business Angels are willing to invest in early stage and these equity investments can dramatically increase the business potential of these companies.
â€œBased on my experience many investments will require for further capital injection. The follow-up funding is usually further 50% in the upcoming years.”
When an idea is exciting and the concept is clean then Business Angels are willing to take the risk in the hope that the concept and a great execution will bring the desired success.
As you can see in other investment areas such as Venture Capital, in many cases Business Angels are going in syndicate to reduce and diversify the initial risk. This way they also have the potential to invest into various projects securing a higher success rate on the return.
Usually a person behind the start-up company or the idea and his capability for success is considered as a main factor. Therefore one of the most important pre-investment phase is the due intelligence of the involved people. In many cases Business Angels trust more in the people involved than the idea itself.
Business experience is not requested but obviously it could bring a huge advantage to the table. When a funding project involved experienced business people, who understands their obligations towards the Business Angels, as well as they know to commercialise their ideas, that can delivery a very positive impact during the fund raising.
Previously we talked about the difference between â€œLifeStyle business” and real entrepreneurship. To understand the difference in a Business Angel investment is almost crucial. Investors are not aiming to fund someones lifestyles.
â€œKeep directors’ salaries under control. It is always better to offer them higher compensation with corporate shares related to business results, instead of exceptionally high, fix monthly salaries.”
The whole fund raising process can be fasten up by the people involved. To develop, gain result and quality in any business sector the most important thing is to create simple and well connected business processes that Business Investors relate to in a clear way. This gives a transparent overview to all the involved parties and a much better understanding.
When people fully understand the corporate processes they are ready to come up with innovative ideas.
This is especially important since investing as a Business Angel always requires that â€œfirst instinct”. To reach that we have to agree that any kind of improvement comes from fully understanding the specific area and by making it as transparent and clear as possible to the people working within it.
When we can reach the full understanding on the business model or idea we can be in a very glad full situation. Despite other investments Business Angels do not spend that much time on the legal process and they never allow the legal legal steps overtake the importance of the due intelligence.