Friday 27th July 2007
Business angels should steer clear of operations
Though business angels can help start-up companies on a strategic level, they are usually less effective when they get involved in operations. In fact, having an angel on your management team might even hold your company back, according to research from Newcastle Business School.
‘If the business angel has quite a lot of experience in the exact area of the business, and they become involved in operations, they can help,’ says Stephanie Macht, who surveyed 71 angels in the course of the research.
‘But if they are involved in manufacturing, for example, and the business they’re investing in is a technology business, the more involved they get, the more problems there can be.’
Almost three-quarters (72 per cent) of the business angels questioned in the study had founded and owned a small business before, lending weight to Macht’s view that angels are at their best when helping to formulate strategy. However, only 32 per cent of respondents stayed within industries in which they had prior work experience.
The research also shed light on business angels’ motivations for investing. Only two-thirds of respondents said that gaining return on investment was 'very important' to them. Other motivations include the enjoyment angels get out of the experience, with over half of respondents stating this was a factor.
Nick Britton
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