Raising funds from business angels does not involve the high fees incurred when raising funding from financial institutions. Most business angels are value-added investors in that they contribute their personal business skills to furthering young businesses and therefore may elect to invest locally to facilitate involvement. This free assistance and advice from an investor who, quite often, is a seasoned veteran of the business world is priceless for young entrepreneurs starting out and would not normally be affordable by other means. Obtaining money from a business angel has a leveraging effect in that it makes the investee firm more attractive to other sources of possible finance. Angel investments certainly heighten venture capital interest in such ventures.
Business angels are less likely to make follow-on investments in the same firm.
Conversely, venture capitalists spend around two-thirds of their funds on expansion funding of their existing portfolio firms. Business angels prefer to have a say in the running of the firms, which may force the entrepreneur to give up some degree of control. Some business angels may have limited expertise in running the particular type of investee firm they fund, making their contribution less value-added and more meddlesome. The search for business angel funds is often difficult though, requiring confidence and persistence on the part of the entrepreneur. There are no directories of business angels.