What is a Founding Angel?

What is a Founding Angel?

Author: ChemistryViews

Business Angels, who invest in companies in the start-up phase, are now an established business model. But what are Founding Angels?

Gunter Festel, Technical University of Berlin, Germany, and University of Basel, Switzerland, explains that Founding Angels support business concepts from the idea to the build-up to the exit. Exit means the sale of a company. A Founding Angel is not an investor, but part of the founding team. They participates in the equity capital, but usually receives no remuneration for their work.

A Founding Angel should be able and willing to provide financial support in times of financial difficulty. This support is usually provided in the form of shareholder loans rather than shares, as valuation is difficult in the early stages of a start-up. However, it is common for the Founding Angel to receive an equity kicker in the form of shares in the company’s success when the next round of financing takes place. From a financing perspective, Founding Angels, Business Angels, and Venture Capitalists complement each other. The transition from one to the other is often smooth.

Experience is extremely important in the start-up world. The Founding Angel can help to make good decisions and avoid typical mistakes in a very early stage. That is why Günter Festel especially appeals to experienced and successful founders to become Founding Angels.


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