Venture capital & business angels

Venture capital & business angels

Start-up companies can have difficulties in obtaining financing. Venture capital (VC) and business angels (BA) are two types of investors that are specialised in financing early-stage companies.

What is venture capital?

Venture capital is a subset of (private) equity and refers to equity investments in the earliest stages of companies’ lifecycles. Venture capital focusses on entrepreneurial companies rather than mature companies. Venture capital is more willing to take risks and, therefore, relevant for companies that are still in an early, uncertain, and pre-revenue stage. By taking higher risks, venture capital providers expect in general higher returns on their investments than other private equity investors.

What are business angels?

Business angels are (often wealthy) individuals with relevant experience (in entrepreneurship or in a specific industry) who invest part of their personal capital in early-stage companies. They use their knowledge, experience, and connections to help coach and support the company. Business angels provide an important role in the economy, as they are one of the largest funders of early-stage companies. Business angels are seen as informal investors and often take non-executive board seats to act as advisors to the start-up managers.

What is the relevance for Circular Cities?

Disruptive ideas and concepts are often introduced by new, entrepreneurial companies. The transition to a circular city requires such innovative, new ideas. Cities can foster early-stage initiatives by supporting entrepreneurs in finding sufficient capital and the right networking opportunities to realise their ambitions. National platforms or investor associations are active in all EU Member States. The membership directory from the European Trade Association for Business Angels, Seed Funds and Early Stage Market Players (EBAN) is a good starting point to get acquainted with platforms active in your country. EBAN also has a dedicated working group on impact investment: the EBAN’s Impact Investment Committee (EIIC) .

Support for business angels:

An interesting initiative for business angels is the European Angels Fund (EAF) , which benefits from advisory support by the EIF. EAF provides equity to business angels and other non-institutional investors for the financing of innovative companies in the form of co-investments. EAF is currently operational in the following seven European Member States: Austria, Denmark, Finland, Germany, Ireland, the Netherlands, and Spain.

EBN is another initiative that is interesting to venture capitalists, business angels and other organisations that enable innovation. This is a network of around 140 quality-certified EU|BICs and has approximately 100 associate members that support the development and growth of innovative entrepreneurs, start-ups and SMEs.