Business Angel Networks: an exploratory study into the value and benefits provided to investors and entrepreneurs
Business angel investment is important to fostering an entrepreneurial economy and building future successful companies. The financing provided by business angels fills in the gap between founders, family and friends at the lower end of the spectrum and institutional venture capital funds at the higher end of the spectrum. The knowhow and expertise of these investors is another crucial complementary asset for the survival and development of small and medium sized enterprises.
The angel market place has evolved rapidly over the last two decades and business angels have found advantages in working together and have began organizing themselves into more formal groups or business angel networks. The key operational objective of business angel networks is to match entrepreneurs and business angels and act as a financial intercessor.
The main scope of this paper is to explore the overall impact these business angel networks have on entrepreneurs and business angels throughout the investment process. This is a challenging field to explore given the business angel market is generally opaque and secretive. This research administers a questionnaire-based survey and is complemented by interviews with directors of business angel networks, entrepreneurs, business angels and other relevant stakeholders.
The results of the study reveal that users of business angel networks are largely unsatisfied with the service offerings provided and there is an acute need for innovation. The main conclusion of this paper is that business angel networks should improve their value proposition by using key innovation drivers. The general recommendations include: 1) increasing the quality of business propositions received and entrepreneurs presenting; 2) improving the quality of their member angels through careful selection and increase their willingness to invest; and 3) better co-ordination of post-presentation activities to increase the ratio of successful investments.