Angel Development

angel investing investment economic development high growthThe growth of Angel Investment is a crucial part of effective and sustainable economic development. Governments around the world have increasingly recognised Business Angels as the key source of funding for high growth potential business.

The European Commission has stated that “Business Angels are an essential part of the financing food chain and from a public policy perspective they need to be well integrated with other sources of financing.” However it is still often not appreciated the extent to which Business Angel Investing is the primary, and in some regions the only, source of finance for high growth potential early stage companies.

Invest Europe (formally known as European Private Equity & Venture Capital Association, EVCA) reported that of the total private equity investing (€71.7bn) in Europe[1]  in 2017, only €600,000 was invested in  “seed” stage companies by VCs across Europe (spanning 1,081 investments) [2]. This pales in comparison to the €6.6bn of investment estimated to have been provided to 38,230 companies by European business angels[3].

In the USA, possibly the most developed venture capital in the world, there are around 5,000 VC deals every year according to PwC MoneyTree™.  However there are likely to be over  70,000 Angel deals. This clearly shows that the vast majority of investments are made not by venture funds, but by Business Angels. CB Insights recently reported that 68% of successfully exited technology companies in the USA and Europe had not had any VC funding prior to the exit.

legislative structural requirements business angel investor developmentFor high growth potential companies Business Angels are likely to be the principal and central component of a developing funding market. Supporting the development of Angel groups is regarded by government as a great way to:

  • Get ‘old money’ into new sectors.
  • Increase the local retention and recycling of wealth.
  • Create credible co-investment partners for institutions and the public sector.

The legislative and structural requirements for Angel Investor development must be understood and supported at the governmental level.

[1] Europe includes: Austria, Baltic countries (Estonia, Latvia, Lithuania), Belgium, Bulgaria, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, Netherlands, Norway, other CEE (BosniaHerzegovina, Croatia, Macedonia, Moldova, Montenegro, Serbia, Slovenia, Slovakia), Poland, Portugal, Romania, Spain, Sweden, Switzerland, Ukraine, United Kingdom.
[2] Calculations are based on the following: Of €71.7bn total private equity investment, majority (€65.3bn) went into company buyouts. Just €6.4bn was classified as VC, of which €0.6bn was invested at the seed stage, €3.5bn in start-ups and €2.3bn in latter stage companies.
[3] EBAN Statistics Compendium, European Early Stage Market Statistics, 2016.