Are the business angels the new patrons of this century?

Tuesday, 11 july 2017 | Redacción CEU

An entrepreneur may have the idea, a good plan, even start it up, but will he have enough money to finance it? Betting on the own project is easy, but when it requires that someone searches for every last penny, everything gets complicated. Many of the big companies that we venerate today would not have gone ahead without the help of a risky investor. Roles like the business angels are essential so the ideas do not remain only in ideas.

What would be of the artistic production without the patrons! It was Cilnio Mecenas Cayo in Rome during the time of Augustus who gave name to this practice, due to the fame that he reached as protector of poets as distinguished as Horacio and Virgilio. At the beginning of the Middle Ages, the Church promoted the culture and, later in this historical period, patronage began to acquire an aristocratic and political nature. Over the course of the history, different collectives promote the work of artists, writers and scientists. Times have changed a lot. Now, the patrons of the XXI century fund companies under masks like crowdfunding, private equity, business angels or venture capital, among others.

The old patrons were what we would name risk investors today. The commitment of the artists to return the investment was minimal and, in some cases, it did not even exist. They were people who believed in a project, an idea or a person and assumed their financing to get in return enjoying this art, owning or exhibiting it. Today, projects, ideas and people still need financial support. If it were not for roles like small risk investors, many companies would not be able to stay afloat.

What are the business angels and how to find them?

The Spanish Association of Business Angels Networks (AEBAN) defines them as individuals who make their own investment decisions and who contribute with their own money, sometimes their time, to companies ran by people who do not belong to their immediate circle. It is so important,  the role of these investors, that they were crucial for the creation of companies with such an importance like Amazon, Skype, Starbucks or Google. Like patrons, at the turn of the past century, business angels began funding artistic productions, in particular, Broadway theater performances. Although their origin is artistic, today, they manage 'like fish in the water' in the finance world and, above all, in the digital space.

Angels investors like to invest in startups. Probably, behind the person who conceives the idea, might be the people who believe the most in the project, so much that they are playing with their own money. Nobody makes the decision for them, they have no adviser to lead them. They do not even have any kinship or relationship with the entrepreneur. The entrepreneur's close circle –Family, Fools and Friends–  may bet on the project because they know the person, but the business angels bet on the project because they believe in it. Precisely, money usually is not their main motivation, although of course it matters a lot.

Nowadays, and although its role is not as widespread as in the United States, business angels can be found through online platforms. One of the best ways to attract a business angel is to do networking. Another option, simpler, is using incubators –nascent companies– and accelerators –more consolidated companies– that can bring the entrepreneur in contact with these investors.