Angel finance: the other venture capital

The procurement of capital is an important consideration for an entity transforming from an entrepreneurial idea to a revenue generating company. Angel financing is one of the most common, but least studied methods, to finance new ventures. The term "Angel Investor" generally refers to a high net-worth individual who typically invests in small, private firms on his or her own account. Using a unique dataset of firms financed by angels between 1994 and 2001, our research provides some insight into the role of angels in funding, monitoring and guiding their investments. Although exposed to greater uncertainty by investing earlier in the life of a firm compared to venture capital investors, angel investors do not rely on traditional control mechanisms such as board control, staging, or contractual provisions to protect against expropriation. Angels may use more informal methods of control such as investing in close geographic proximity and syndicating investments with other angels to mitigate risks. The results of the study indicate that angels have a complementary role to venture capital in the financing of new ventures. Copyright (C) 2009 John Wiley & Sons, Ltd. In 1976, Anita Roddick, a self-confessed hippie who found natural ingredients to sell as cosmetics in cheap plastic bottles, needed money to open a second shop. Her bank had rejected her request for a loan on the grounds that her business idea was not viable. Ian McGlinn offered her 3000 pound to set up the shop. In 2006, when Roddick sold her company, 'The Body Shop', McGlinn's stake was worth approximately 137 pound million.(2)