Page 85 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.71, # 2, 2014, pp. 81-93

Business angels are an attractive way to finance a start-up venture. They provide the financing

and in return the entrepreneur is willing to share the later profits. Angels have historically been a

primary source for startup capital (Morrow, 2013). Since the funding is often informal, many

statistics fall short of what is actually being lent. However, the Center for Venture Research

reported that $22.9 billion was funded by angel investors in 2012 and was spread between

67,030 ventures that year (Morrow, 2013).

Once an entrepreneur’s personal funds are exhausted, and they have sought out financing

through friends and family, they must continue to look for sources of financing. Business angels

are sought after while the company is still in the early start up stages and moving through the

survival stage (Leach, 2012, p. 108).

There are advantages to seeking finance through a business angel. Most business angels

have a great wealth of business knowledge. They don’t just offer financial assistance, they can

help contribute their expertise and skills to grow the business (Ramadani, 2012). This can

increase the growth potential of a firm.

Business angels investments range from $50,000 to $500,000 or more (Hall, 2012). This

can boost the financial standing of a venture in one shot. Often taking the venture into a more

serious level and pushing past the start – up stage. With a large capital influx, an entrepreneur

may be able to raise funds from one business angel instead of needing to piece meal the

financing through several sources.

A combined advantage and disadvantage is the return of partial ownership in exchange

for funding. This is an advantage initially in that unlike other types of debt there are no

immediate needs for repayment. The funding can all be used and not needed to allocate back for

interest payments. However, at some point the investors will want to see profits and the

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