A business angel is a person who invests their own money in early-stage companies and who, along with capital, usually brings experience and contacts. They enter the cap table as a shareholder, through a capital increase, or through a convertible instrument that converts into equity later on.
Business angel and venture capital fund: the difference is in the money
The angel invests their own wealth and decides alone, without committees. A venture capital fund invests third-party money, with a formal analysis process and obligations to its investors; its management company operates under CNMV supervision (Ley 22/2014).
| Criterion | Business angel | Venture capital fund |
|---|---|---|
| Source of money | Own wealth | Third-party capital (investors) |
| Usual stage | Pre-seed and seed | From seed onwards |
| Indicative ticket | Tens of thousands of euros | From hundreds of thousands to millions |
| Decision | Personal and quick | Committee and formal due diligence |
| Involvement | Direct mentoring to the team | Advice, reporting and monitoring |
Issuer's rule: for the first few hundred thousand euros, look for angels; with a validated model and metrics, funds. And remember that many angels co-invest with funds in the same round: they are not mutually exclusive.
How a business angel enters your cap table
The first route is a capital increase: the angel subscribes new shares or units, pays the agreed premium and signs the shareholders' agreement. The second is the convertible instrument: it lends money today and converts it into equity in the next financing round, at a discount to the valuation. In Spain the usual format is the convertible note, a loan agreement, different from convertible bonds, which are securities issued in series. The third route, less common at the initial stage, is buying shares from an existing shareholder.
Always document information rights and drag-along and tag-along clauses. A clear agreement with the first angel avoids expensive renegotiations in the Series A.
Syndication: many angels, a single entry
When several angels invest at once, grouping them into a vehicle or syndicate avoids filling the cap table with micro-stakes. Twenty shareholders with 5,000 euros complicate every meeting, every signature and every subsequent round. The vehicle pools the contributions and acts as a single shareholder vis-à-vis the company. The agreement must state who exercises the vehicle's voting rights and how decisions are made within the syndicate. Decide the format before opening the round, not after receiving the transfers.
What to look at before accepting an angel
Not all money is worth the same. An angel with experience in your sector reduces mistakes; one without it only provides capital. Ask for references from founders of other portfolio companies and ask about their behavior in bad times. Also clarify their expected commitment: some angels want a monthly meeting and others disappear until the next round.
Agree in writing what happens if they do not follow on in future rounds. If they do not exercise their pre-emptive right, they are diluted like any other shareholder; putting it in writing avoids arguments later.
What if the equity is tokenized?
If the company is a public limited company (S.A.) and represents its shares through tokens, the angel's right is the same (an S.L. would first have to convert into an S.A.); what changes is the registry medium. Tokenized securities are recorded in a registry based on distributed ledger technology operated with an ERIR, the entity responsible for registration and recording, the digital notary of the shareholders' register (Ley 6/2023, art. 8; RD 814/2023). The first ERIR authorized in Spain was URSUS-3 Capital, A.V., in November 2024.
For the issuer, the tokenized registry keeps the snapshot of the shareholder base updated operation by operation, including convertibles and syndicates. The practical detail is in startup tokenization and cap table on-chain. If you plan that route, tell the angel before signing: it is a change of form, not of rights, and the agreement should reflect it.
Are you going to bring in business angels and want an orderly shareholders' register from day one? Take the issuance diagnosis (2 min) or request a proposal. If you prefer to start by reading, download the 2026 guide.
This content is informative and educational. It does not constitute legal, tax, or investment advice. Check the current version of each regulation in the BOE and on EUR-Lex.
HokenFi is a software and infrastructure provider; it does not provide regulated services (CASP, ESI, EAF, or ERIR). This article is informative and does not constitute financial or legal advice.
Frequently asked questions
What distinguishes a business angel from a venture capital fund?
A business angel invests their own money, decides personally and enters at very early stages with smaller tickets. A venture capital fund invests third-party money, follows a formal process with an investment committee and its management company is supervised by the CNMV. For the issuer, the stage and the amount determine whom to approach.
How does a business angel invest: equity or convertible?
Both formulas are common. They can subscribe shares or units in a capital increase, with a shareholders' agreement, or lend through a convertible note that converts into equity in the next round. The convertible note is a loan agreement, different from a convertible bond, which is a security issued in series.
Does anything change for the business angel if the equity is tokenized?
Their rights as a shareholder do not change; the registry medium changes. Tokenized shares or units are recorded in a distributed registry operated with an ERIR, under Ley 6/2023 and RD 814/2023. The first ERIR authorized in Spain was URSUS-3 Capital, in November 2024.
