About business angels

Abstract

The role venture capital firms play in the money and capital market is known also in Hungary – although to an extent and in a circle far from satisfactory. A portion particularly important from the aspect of national economy involves venture funding of small and medium enterprises (hereinafter referred to as SMEs) with a considerable growth potential. Much less known is, however, that an even greater economic significance is attached by the latter group to so-called business angels. They are private individuals on the capital market, who carry out enterprise development and funding activities, similarly to venture capital. Their name comes from British-American literature and they provide venture capital type funding to enterprises, and, parallel to that, they are also personally involved in the strategic control of enterprises or in the operation thereof, if need be, in order to promote their development and strengthening. They provide investment and other cooperation always on a business basis and in business arrangements, but their motives are broader and more complex than those of venture capital firms. Their activities in developing enterprises and providing venture funding to them complement those of the latter, and are often interlinked with them, which may considerably improve the opportunities of small enterprises with a good growth potential in obtaining capital.