In this article, we tell you everything you need to know about how to become, and what it's like to be an angel investor. We cover everything from what the term means to tips on what to consider before becoming an angel investor. 

What is a business angel?

An angel investor is an individual who invests money in a company and in return receives some ownership in the company. In addition to money, the angel investor usually provides experience, contacts and guidance, with the aim of maximizing the growth of the company. 

Key steps to becoming an angel investor

Below we outline the typical steps to become an angel investor. 

1. Invest or save up for a seed capital to invest with. Keep in mind that angel investments are risky and long-term, so only invest with money you can afford to be without. It is common for business angels to have been entrepreneurs themselves and successfully sold a business.
2. Learn how typical business angel sectors work. Companies looking for business angels are usually active in IT, medical technology and environmental technology. However, it is important that you stick to industries that you understand.
3. Network with other angel investors. It is not uncommon to get good tips from other investors, and sometimes an offer to be a co-investor at a investment in startups. Co-investing with others is a good way to spread risks and learn from others.
4. Identify one or more companies seeking angel investors, and review things like business idea, potential in the industry and likelihood of success of the product or service the company is building. 
5. Invest money and expertise in the company or companies you want to support as an angel investor. Being an angel investor is a long-term process, so continuous contact with the company you invest in is important. 

Benefits of being an angel investor

Below we outline the key benefits of being an angel investor. 

• It is possible to get a very high return on invested capital. If you enter as an angel investor early on, and the company does very well, it will lead to a large financial gain. Examples of such companies include Spotify and Storytel, where early investors have made large profits. 
• It is common to develop yourself and gain a better insight into the industry by being an angel investor. And the more industry knowledge you have, the more likely you are to make money from future angel investments. 
• If your company is innovative, for example if it produces a new medicine, you will be contributing to the positive development of society if your company succeeds in producing a good product. 
• You have a great opportunity to influence the direction the company takes when you enter with a significant ownership at an early stage. Once the company has grown, and you buy shares in it, for example, your ownership will be much smaller in percentage terms and your ability to influence it will be limited. 

Risks of being an angel investor

Below we explain the most common risks associated with being an angel investor. 

• Being an angel investor means making high-risk investments in companies that may well fail. If the company fails, you lose all the money you invested. 
• Angel investing is not a short-term investment, it has to be long-term, which means that you follow and influence a company over a longer period of time. 
• The companies you invest in usually have low liquidity, which means that it is often difficult to sell the shares you have bought in the company. Listed companies, on the other hand, have good liquidity, as you can buy and sell their shares almost whenever you want. 
• It is difficult to predict how the company will fare in the future. Even if the know-how and the business idea are there, something external can affect the market that makes the interest in the company's products disappear.
• You may be faced with tough decisions, it is not uncommon for business angels to be faced with a situation where they either inject more money into the companies they have invested in or the company goes under. This can lead to having to invest more in a company than you originally intended. 

Who are the famous business angels in Sweden?

Some of the well-known business angels in Sweden are:

• Niklas Zennström, who founded Skype and owns the venture capital company Atomico. 
• Jane Walerud, who sold a software company for over SEK 1 billion. She has been involved as an angel investor in several Swedish companies such as Klarna and Lensway. 
• Lena Apler, who founded Collector and has been an angel investor in companies such as Wint and Dreams. 
• Sophia Bendz, a former marketing manager at Spotify, has been involved in the start-up of companies such as Tictail, Bokio and Prion. 

Frequently asked questions

How much money does it take to become a business angel?

A capital of between SEK 100 000-500 000 per company you want to invest in is generally considered a minimum level. The rule of thumb is: the later you want to invest, the more money you need. 

How much time is required to be an angel investor?

The amount of time required varies, but to make a greater impact as an angel investor, it is good to take an advisory role and have supportive conversations, for example. Serving on the board of directors is sometimes also an option. 

How can I reduce risks as an angel investor? 

As an angel investor, you can buy unlisted shares in companies that have come a long way and are already backed by other successful investors. Investing only in companies you understand is also a way to reduce risk.

When do I get my return?

Your eventual return is normally received when the company is sold or goes public. Due to the generally low liquidity of company shares, it is usually difficult to recover your investment before this. However, it is possible to sell unlisted shares through our platform. Please contact us at [email protected] if you would like more information on how to sell an unlisted holding through us.

What does business angel wanted mean?

Business angel search means that a company is looking for help to grow with the help of an investor. The business angel who joins the company contributes, among other things, money, know-how and contacts in the industry.