Business angels are persons each of whom has developed their own “best” investment process model. In general, the investment process can be considered starting from when the investor identifies an investment opportunity and ending when he or she exits the company. The main stages of the investment process can be divided into seven steps.

When looking for companies investors visit various events where they are able to familiarise themselves with potential target companies. Existing contact networks are also used in this step of the process.

When selecting companies investors examine options in the market and select the best for analysis based on their own investment criteria. The investment criteria are investor specific. They are analysed in more detail in section 3. After selecting the investment and before the analysis, a preliminary investment agreement (Term Sheet) which ensures mutual alignment for the duration of the process may be signed.The Term Sheet also specifies the main terms and conditions of the investment. It may be difficult to change the terms afterwards. An example of a Term Sheet can be found here: or

When analysing companies investors analyse the investment target and its valuation in the light of uncertain information. The analysis criteria are in part the same as those for the selection of companies, but the information is deepened and expanded on as much as possible (chapter 3).

In the final negotiations on an investment the investment is either rejected or the investment agreement initially made is clarified further to form a shareholder agreement. The most important section of the final negotiations consists of determining the valuation of the target correctly. A positive decision is made in respect of 1–6% of all companies screened.

Specific issues in the closing negotiations may put a stop to the investment. Issues such as this can include, for example, the willingness of the founder shareholders to accept suggestions and/or criticism or the unwillingness of a founder shareholder to step down from the post of CEO. According to Acland (2011) statistics, 65 per cent of companies that changed their CEO survived and only 9 per cent of companies that did not change their CEO survived. It is no wonder, then, that this section has become one of the key investment criteria.

Investment process
Step by step investment

Where venture capital companies may make a large single investment, business angels tend to make investment in stages, which means that the amounts invested and the risks are more manageable. The size of investments varies from 10,000 euros to 250,000 euros per investor. A typical amount in Europe (and worldwide) is approximately 25,000 euros per investor and investment. When comparing averages from around the world, it is rather amusing that the average has not changed at all during the past 10 years and the currency used is irrelevant. The average is the same whether using dollars, pounds or euros. –