Business angels can be a crucial resource for fledgling firms, helping them survive and thrive. For investors, the risks are high, but the rewards can be spectacular, says David Prosser
For entrepreneurs, the plateau effect is an all-too common phenomenon. They get their business up and running, prove to themselves that their big idea works, and even begin to make some sales. Then they face some harsh realities. How will they turn this early stage business into a commercially viable enterprise when they lack the funding, the experience and the connections to make such a leap?
Stuck on this plateau, as many as 60% of new UK businesses fail in their first three years. But for a growing number of entrepreneurs, there is now help at hand. The UK is home to 10,000 active business angels seeking to support these early stage ventures.
“Our business-angel community is the same size as the rest of Europe’s put together,” says Roderick Beer, managing director of the UK Business Angels Association (UKBAA). “We’ve been doing this very successfully for the past 30 years.”
Business angels are individual investors who take small stakes in immature businesses, either working alone or alongside other angels. Their investment provides valuable funding for the company as it grows, but angels also provide all sorts of additional support: business advice and mentoring; introductions to potential partners; customers and employees, or even just a shoulder to cry on.
“Being a business founder can feel very lonely,” says David Pattison, an angel who has invested in a dozen companies over the past decade or so. “I describe myself as a wingman. I’m here to help in any way that I can.”
Pattison has provided much-needed finance to each of the firms he has backed, but his expertise and experience have arguably been more important. Now in his sixties, he spent most of his career in advertising, launching his own business in 1990 before selling it six years later. After studying at Harvard Business School and stints in agencies around the world, he took over as CEO at a digital media company and sold that too.
Spinning too many plates
In other words, he is familiar with most of the challenges and opportunities that entrepreneurs are likely to face, and he enjoys sharing his wisdom. “I have absolutely no desire to be the big dog these days, but I can help CEOs to avoid making all the mistakes I made when I was doing their job,” Pattison adds. “They’re spinning so many plates, so if
