What a business angel must bring to the table

Start-ups can benefit extremely from investors - but they have to pay attention to some factors.

The right business angel can be a major success factor for a start-up. After all, a business angel's capital is not primarily his money, but it is his knowledge, skills and experience that he shares with the founders. For a start-up, it is important to quickly find the right product, network with the right stakeholders, and then acquire sufficient resources to grow. Founding teams rarely accomplish all of this on their own. Above all, a business angel should bring along what the team is still lacking in order to develop a successful growth company from an idea.

A business angel can therefore support founders especially in areas where the team lacks expertise, skills or experience.

Dr. Julius Tennert

What are typical roles of business angels?

The most common role of the business angel is that of advisor. The business angel supports the founding team with his or her extensive industry or technical knowledge and helps the team formulate the business strategy and advises on how to proceed. In this way, founders can benefit from the business angel's knowledge in critical management areas such as sales, finance or marketing. A business angel as an advisor is particularly valuable to founders when the team lacks certain industry or technical expertise, or when the team is still inexperienced.

The business angel as a supervisory or advisory board, on the other hand, is more of an external stakeholder. In this function, the business angel receives clearly defined information and co-determination rights, which ensure that decisions made by the founding team are transparent and controllable for outsiders. Such a "separation of powers" is an important risk management tool for many venture capital investors and therefore often a prerequisite for an investment. A business angel as a supervisory or advisory board is important if founders plan to bring other investors on board in the future.

The business angel in the function as a multiplier supports the founding team mainly in the procurement of important resources for from his personal network. These can be, for example, business contacts to potential customers, suppliers and investors. With the help of the business angel, it can be possible to establish important relationships with external stakeholders more quickly and thus gain better access to their resources. A business angel as a multiplier increases the chances of success of a start-up especially if the founding team wants to become active with its idea in a new industry or a new region, in which the team itself has not been networked so far.

The Business Angel as Mentor accompanies founders in their personal development as entrepreneurs. In this function the Business Angel is above all a person of confidence, who supports the team or individual team members morally with important decisions, in difficult times encourages and is partner for sensitive personal topics. In this way, the business angel relieves the founders of some of the burden they have to carry as entrepreneurs. Founders benefit from a business angel as a mentor especially if they have little management experience and have to find their way into their new role as a responsible person in a start-up.

What qualifications does a business angel need?

In order to know what qualifications a business angel should have, founders must first of all be honest with themselves and know exactly what their requirements and goals are. The next step is to determine which of the above-mentioned roles the founding team expects from the business angel. These expectations should already be clearly formulated in the initial discussions. A relationship with a business angel is always a reciprocal one, so founders should not be shy and also ask potential business angels what skills and experience they bring to meet their own expectations.

A relationship with a business angel is always a reciprocal relationship, founders should therefore not be shy.

Dr. Julius Tennert

If a business angel is to act as an advisor, he should above all bring specific expertise that the founding team lacks. The team must be able to fully rely on the expertise of the business angel, the business angel must be an expert in his field. A good indicator is, for example, if the professional career of the business angel is primarily characterized by these specialized topics.

If a business angel is to act more as a supervisory or advisory board member, his industry- or subject-specific knowledge is less important than his general management experience. The business angel should have experience in dealing with conflicting objectives and in stakeholder management. A good indicator of these skills is, for example, many years of experience at C-level.

If a business angel is sought as a multiplier, the business angel's network is crucial. In order to be able to evaluate the business angel's network, founders should already have very concrete ideas about which contacts the business angel should establish for the team. In order to get an insight into his network, founders should always ask a business angel to name concrete persons to whom he can establish contact.

It is certainly most difficult to find a business angel as a mentor. The personal compatibility between the founders and the business angel must be the highest in this case. All parties involved must be able to communicate openly with each other and weaknesses in particular must not be a taboo subject. Founders should therefore first build up a relationship of trust with a business angel as a person before embarking on a joint path on a professional level. Conversations with people from the business angel's environment can also help to get to know him or her better. These can be, for example, other founders, employees or former companions of the business angel.