A killer business idea or a solid strategy and proposition doesn’t always guarantee success. Even some of the biggest brand names, from Airbnb to Uber, got financial help from angel investors. But who are these angelic financiers, and how might they support your business? Well, these wealthy individuals invest money in certain ventures if they believe in their vision and growth potential. 

We explore what business angels do, their pros and cons, plus viable alternatives, including flexible business loans, grants or other equity investment solutions. 

What are business angels (or angel investors)?

Business angels, also known as angel investors, are high-net-worth individuals who invest their own money into early-stage businesses in exchange for equity. Unlike institutional investors, they often bring hands-on experience, industry connections and mentorship to the table, as well as capital. 

The term originates from the world of theatre in the 1900s, when Broadway producers would turn to the wealthy for financial help. Today, the meaning of business angels is more widespread and applies to individuals with wealth who are prepared to fund ventures and start-ups they believe in.

Angel investment is typically used by start-ups that need funding to build a product, hire a team or reach new markets, but aren’t yet ready for bank loans or venture capital. Most angels invest between £10,000 and £500,000, either solo or as part of a syndicate.

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What are the different types of business angel investors?

For many entrepreneurs, the search for funding starts close to home, through wealthy friends or family. However, there are plenty of opportunities for angel investment outside your inner circle. 

Here are some of the most common types of business angel investors to consider:

1. Entrepreneur angels

Successful entrepreneurs often look to back other businesses as an alternative way to generate income. They tend to invest the largest amounts in start-ups.

2. Enthusiast angels

Unlike entrepreneur angels, enthusiast angels see investment opportunities as more of a hobby. These angel investors tend to be older, looking to make smaller investments across various companies, and therefore, often don’t want to take an active role in managing the companies they invest in.

3. Corporate angels

Having previously come from a senior position at a large corporation, corporate angels seek profitable investment opportunities, which also come with a job. As part of the deal, these business angels are after a paid position and are, therefore, typically involved in just one investment at a time.

4. Micromanagement business angels

Micromanagement angels are typically those who’ve found success through their own ventures and efforts. In return for their investment, they will likely expect a place on the board. From this position, they often take an approach they’ve used to success with their own previous companies.

5. Professional angels

These angel investors are professional doctors, lawyers, accountants, etc., who invest in companies from within their field. They may even offer their services to the company at a reduced rate.

Benefits of using business angel investors

New businesses don’t always get the same funding opportunities as more established companies, so angel financing is a great way for start–ups to gain momentum and reach their full potential. Beyond just the extra money, there are several other benefits of working with an angel investor. 

Here are the main advantages of funding from business angels:

• Risk appetite: As angel investors tend to have an entrepreneurial background, they may have an understanding of what you’re trying to achieve and the risk that entails, meaning they’re more comfortable taking on that risk. If you can convince them that your idea is worth their money, then they could be open to offering larger sums of money than the bank or venture capitalists.‍
• Experience and expertise: Business angels aren’t just offering their money, they are providing their experience, knowledge and guidance. Some may come with a network of people, such as other investors, suppliers, distributors or buyers, who can support your venture.
• No interest or repayments: Unlike traditional business loans, most angel investments are interest–free and don't require monthly repayments. Even if your business never takes off, you won’t be expected to pay back the funds. With a business angel, you receive capital in exchange for a stake in your business. And if your business turns into a success, then you both benefit from future profits

Disadvantages of business angels for start-ups

Angel investment can offer powerful potential, but there are trade-offs to consider, such as equity dilution and relinquishing a degree of control. 

Here are the main potential downsides of angel investment:

• Losing some control of your business: In exchange for funding, you will need to give up a portion of ownership, and over time, this can reduce your control and share of profits.
• Misaligned expectations: Business angels may push for growth or exits that don’t match your timeline or vision, which can cause friction. 
• Founder pressure: Taking money from an individual investor often creates a personal sense of accountability, potentially adding pressure and stress.
• Time-consuming process: Building relationships, pitching and negotiating terms can take weeks or months, which may not suit those needing fast access to funding.

It’s important to weigh up whether equity funding is the right path or whether other options like small business loans or government grants could meet your needs without you needing to give up any ownership control.

How to find the right angel investor for your business

Finding the right angel investor is about more than just securing funding, as the goal should be to build a partnership with someone who understands your vision and adds value to your journey.

Here are some of the places, beyond your own network, you can begin your angel investment search:

• UK Business Angels Association (UKBAA): The UKBAA has the UK’s largest directory of early-stage investors, advisors and intermediaries. So when looking for angel investors for a small business, use this directory to research prospective angels before approaching them with your idea.‍
• Angel Investment Network: On platforms like this, you can upload a pitch and connect with a global network of potential angel investors.‍
• Crowdcube: Crowdfunding sites may not be your first thought, but many business angels invest on or alongside crowdfunding platforms like Crowdcube. And you could be their next opportunity.

The right angel investor will not only believe in your product but also align with your values and goals. Look for someone who has invested in similar businesses, understands your market and has time to support your growth.

What do business angels get in return for their investment?

Angel investors receive equity (shares in your company) in return for their capital. Their return depends on the business growing in value over time, ideally leading to an exit such as an acquisition, IPO or buyout.

Along the way, they may also benefit from:

• Tax relief through schemes like SEIS and EIS
• Influence in key decisions if they take a board or advisory role
• Personal fulfilment from mentoring founders or backing industries they care about

Since angel investing is high-risk, they typically aim for big returns from a small number of successful ventures, knowing many will fail.

How to pitch to business angels and secure investment funding

To pitch to angel investors effectively, you need more than a slick deck. You’ll need to have a compelling story, credible business plan and confidence in your finances and projections.

Here’s what most business angels want to see from your pitch:

• A clear and urgent problem you're solving
• A scalable product or service with market demand
• Early traction, even if small (customers, revenue, waitlists)
• A strong, coachable founding team
• A defined route to return on investment

Keep your pitch clear, concise and focused on what matters: the opportunity, the ask and why you’re the team to deliver. Personal chemistry counts – most angel investments are based as much on trust as numbers.

Real-world examples: Top UK businesses funded by angel investors

We mentioned earlier that some of the big-name international brands like Airbnb, Uber and Spotify started their journey with angel investment. Well, many well-known UK start-ups got their break thanks to angel investors, primarily fintechs, payment providers and other smart tech apps, taking them from bright ideas to fast-growing businesses.

Here are some of the top UK business angel success stories: 

• Zoopla and Purplebricks: Popular real estate apps simplifying valuation and estate agent services, backed by angel investors Simon Murdoch and Errol Damelin, respectively. 
• Wise (previously TransferWise): One of the leading international money transfer apps broke through a competitive market thanks to combined angel investment. 
• Tide: In 2025, Tide received unicorn status, but when starting out, this London-based fintech received early-stage angel funding from Errol Damelin and Alex Chesterman, alongside VC backing. 
• RobinAI: An AI-powered legal tech company, backed by Tom Blomfield (founder of Monzo).
• Sidekick: A wealth management app that received investment from a network of angel investors, including the co-founder of Gumtree, and institutional investors to support its launch.
• Koyo: A credit-check alternative lender that secured angel backing from Matt Robinson (GoCardless).
• Penny: A pension aggregation app, part-funded by Hristo Borisov, founder of fintech unicorn Payhawk.
• GoodBox: A contactless donation platform that raised angel funding from Andy Murray to expand its reach across the UK charity sector.

In fact, many of the backers of these companies mentioned above got angel investment themselves, including GoCardless and Gumtree.

What are the alternatives to using angel investment?

Angel investment can be a powerful way to raise capital, especially in the early stages of growth. But it’s not the only route available. Depending on how quickly you need funding, your risk appetite and whether you want to keep full control of your business, there are alternative business funding options worth considering.

Business loans

Many people think of start-up business funding in terms of investors. However, start-up loans can provide a quick source of capital to get your business moving.

As it’s a debt-based funding option, you’ll borrow a fixed amount and repay it over time with interest. While you can source government-backed start-up loans through The British Business Bank, which help those without business credit histories to support their funding applications, certain alternative lenders can offer loans for start-ups. For example, iwoca’s flexible business loans are open to businesses that have been up and running for at least12 months.

While funds must be repaid with interest, using a loan means you’ll retain full ownership of your business, unlike with angel investment.

Crowdfunding

Using crowdfunding enables you to raise smaller sums from a large number of individual investors, through platforms like Crowdcube or Kickstarter. This can be either equity-based (selling shares) or reward-based (offering products and perks in return for funding).

While it can be a great way to build early support and test demand, crowdfunding campaigns take time and require strong marketing. Angel investment is more targeted and can move faster once you’ve built the right relationships.

Venture capital

Seeking venture capital (VC) is often the next step after angel investment. VCs invest larger amounts, usually in businesses that are already scaling and need capital to grow quickly.

VC firms tend to be more structured, with formal reporting and growth targets. Business angels, by contrast, are more flexible and often get involved earlier, providing mentorship as well as capital.

Grants

Business grants are non-repayable funds provided by public bodies or innovation schemes. They’re highly competitive but can be ideal for R&D-heavy businesses, especially in tech, sustainability or healthcare.

While grants from the government or other initiatives are attractive, because they don’t require equity or repayment, they’re competitive and often involve long application processes and strict eligibility criteria. Also, they’re usually offered in specific funding windows. 

Peer-to-peer lending

Another increasingly popular route for budding entrepreneurs is peer-to-peer (P2P) lending. There are numerous P2P lending platforms, such as Funding Circle and Folk2Folk, which help prospective lenders match with suitable businesses seeking growth. 

Essentially, you upload details of your project and funding needs, with interested lenders offering all or part of the amount required (until your total is met). Loan terms are quickly negotiated and agreed directly on the platform.

Bootstrapping

There is also the option of funding your business yourself, through personal savings, early sales or reinvested profits, which is often referred to as bootstrapping. This gives you full control and avoids debt or dilution, but it can be hard work.

The main trade-off with bootstrapping is speed, as growth can often be slower without external backing to unlock large sums of capital for growth. Angel investment allows for faster scaling, but comes with shared ownership and expectations around return on investment.

Can a flexible business loan fuel your business growth?

Whether you’re a start-up or early-stage business seeking capital to help grow your venture, a flexible business loan can be a viable alternative to equity funding. At iwoca, we designed our Flexi-Loans to meet the needs of growing UK businesses, helping over 150,000 entrepreneurs and companies to reach their growth potential while managing their cash flow effectively.  

Our business loans are quick and easy to access – you can apply online in minutes and get a funding decision within 24 hours. Whether you need to borrow money for a few weeks or months, or longer, we provide flexible terms tailored to your needs, and you’ll only pay interest on what you draw down.

You can apply today (without impacting your credit score) or check out our handy loan calculator to see what you can borrow and the likely repayments. 

Business angel investors FAQs

What’s the difference between angel investors and venture capital investment?

Angel investors are individuals who invest their own money in early-stage businesses, often before these companies have achieved significant traction. Venture capital (VC) firms invest larger sums on behalf of institutions, typically in start-ups that are already growing fast and ready to scale. The key differences lie in the amount invested, business stage and the investor’s level of involvement.

While both provide equity funding in exchange for a share of your company, they serve different purposes in the start-up journey. Angel investors often bring hands-on support and mentorship, whereas VCs focus on rapid growth.

In many cases, start-ups begin with angel investment to get off the ground, then raise VC later to scale. Choosing between them depends on your current stage, growth ambitions and appetite for ownership dilution.

Are business angel investors regulated?

A regulatory framework is in place to protect business angels and entrepreneurs. Before a pitch is accepted, or business plans are passed, you should make sure that your investor has self–certified as either ‘high net worth’ or ‘sophisticated’, as defined by the FCA under the Financial Services and Markets Act 2000.

What is a business angel investor network or syndicate?

A business angel investor network is a collection of angel investors who meet, discuss opportunities and invest in businesses. Sometimes networks are specialised by region, or sometimes by industry. When these business angels are organised in this way, it enables them to make joint investments with other like-minded investors, allowing them to share the risks as well as the rewards.

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