Business Angels invest more than venture capitalist funds

A new OECD report looks at how new businesses and start-ups have been raising money since the crisis, with banks reluctant to provide loans to start-ups, and venture capital firms preferring to reduce their risks and invest in later stage companies. It says that a growing class of business angels is stepping in to fill this funding gap and their importance is likely to rise in future, as the financial sector recovers only slowly.

Financing High-Growth Firms: The Role of Angel Investors looks at angel investment around the world and includes over a hundred interviews with entrepreneurs, policy makers and academics from 32 countries including Switzerland. Government policies to boost angel investment are also reviewed, including tax incentive schemes in the U.K. and France and co-investment funds in the Netherlands, Scotland and New Zealand.

 The findings show that angel investments are increasing and, while precise data is hard to collect, the report points out that estimates of the total angel investment market in a number of countries are greater than traditional venture capital investment, particularly for seed and early stage financing. In 2009, the total estimated angel market in the US was USD 17,700 million compared to USD 18,725 million for the venture capital market. And in Europe the total estimated angel market, at USD 5,557 exceeded the VC market which stood at USD 5,309 million.

One reason for the rising figures are angel networks and other initiatives. From Switzerland the report presents the model of CTI Invest.

 While policy makers tend to focus on the venture capital market, which is more visible than the angel market, these data from the US and Europe indicate that angel investors will continue to be critical in overcoming the financial and growth challenges facing entrepreneurs, in turn, contributing to innovation and job creation, according to the report.

The report can be bought online at the OECD bookshop. It is also possible to browse the publication for free via the “Look inside” button. It seems that browsing for free only works with Windows Internet Explorer.