Multitudes gather for angelic visitations

The increasing role played by private investors in funding Britain's start-up businesses has long been acknowledged, writes Roger Trapp. But nobody seems to have anticipated the level of activity unearthed by a study at Oxford University's Templeton College.

Not only does it appear that these individuals could together invest more than pounds 10bn in young companies, but each "business angel" puts up far more money than had previously been supposed - pounds 265,000 over three years, rather than the earlier suggestion of pounds 22,000.

Based on a survey of 389 angels taking part in 467 deals, the study, Business Angels. Tapping the Potential of Individual Investors in Britain, claims to be the most comprehensive undertaken. Originally the subject of Patrick Coveney's DPhil research, it has been expanded with the help of Templeton fellows Karl Moore and Janine Nahapiet.

But although there is much more going on than had been thought, the authors suggest that things can be done to make the phenomenon more effective.

Pointing out that angels can be divided into six categories, they say entrepreneurs looking for funds should pursue strategies that focus on the angel grouping most appropriate to themselves. They should also establish personal networks, identify individual targets within the grouping and then build long-term relationships.

The study found that the most important question angels ask is whether they can trust the entrepreneur, and they can only answer that if they know the person involved.

The exchange of information between angels and entrepreneurs can also be made more efficient. Angels say that 95 per cent of the proposals they receive are of no interest to them.

Moreover, for all the attention given to the various business introduction services, these organisations do not appear to be especially effective. Only 13 per cent of the deals analysed by the study came about through the involvement of business introduction services. The authors point out that this figure is particularly low, given that all the angels in the study were either current, former or potential subscribers to one of a group of introductory services.

Finally, there are tasks for the government. Arguing that existing efforts have been based on various false assumptions, Mr Coveney and his colleagues suggest that, since investors are less geographically restricted than previously thought, the emphasis should shift from encouraging local networks to developing national ones.

Second, there should be a focus on angels who invest substantial amounts often rather than on smaller, infrequent, locally based investors. Third, there should be encouragement for private bureaux to appear alongside the public-sector services. Finally, more should be done in the area of tax benefits for those supporting start-up ventures.

But the calls for improvements should not obscure the great contribution that wealthy individuals already make to high-risk young businesses by filling the funding gap left by banks and venture capital companies. Not that such people are as purely philanthropic as their nickname suggests. Although the risks are great, so too are the potential gains. The study found that the few ventures chosen for investment typically grow by more than 200 per cent over three years. Angels apparently enjoy returns well ahead of those expected and three-quarters say they are satisfied with the outcome of deals.

And, while they generally take stakes of about 35 per cent and provide more than one tranche of funds, angels also bring a lot more than money. In more than a third of deals, they make significant management contributions.

PROMOTED VIDEO
Extras
indybest
Travel
Flocking round: Beyoncé, Madame Tussauds' latest waxwork, looking fierce in the park
travelIn a digital age when we have more access than ever to the stars, why are waxworks still pulling in crowds?
Arts and Entertainment
tv
Arts and Entertainment
Judi Dench appeared at the Hay Festival to perform excerpts from Shakespearean plays
tvJudi Dench and Hugh Bonneville join Benedict Cumberbatch in BBC Shakespeare adaptations
Sport
Is this how Mario Balotelli will cruise into Liverpool?
football
News
Ronahi Serhat, a PKK fighter, in the Qandil Mountains in Iraqi Kurdistan
i100
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Arts and Entertainment
Poet’s corner: Philip Larkin at the venetian window of his home in 1958
booksOr caring, playful man who lived for others? A new book has the answer
Arts and Entertainment
Exhibition at the Centre Pompidou in Metz - 23 May 2012
art
News
Matthew McConaughey and his son Levi at the game between the Boston Red Sox and the Houston Astros at Fenway Park on August 17, 2014 in Boston, Massachusetts.
advertisingOscar-winner’s Lincoln deal is latest in a lucrative ad production line
Life and Style
Pick of the bunch: Sudi Pigott puts together roasted tomatoes with peppers, aubergines and Labneh cheese for a tomato-inspired vegetarian main dish
food + drink
Arts and Entertainment
Alfred Molina, left, and John Lithgow in a scene from 'Love Is Strange'
film
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Junior Quant Analyst - C++, Boost, Data Mining

£25000 - £35000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...

Service Desk Analyst- (Desktop Support, Help desk)

£25000 - £35000 per annum: Harrington Starr: Service Desk Analyst- (Desktop Su...

Junior Quant Analyst (Machine Learning, SQL, Brokerage)

£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst (Machine Lea...

UNIX Application Support Analyst- Support, UNIX, London

£45000 - £55000 per annum: Harrington Starr: UNIX Application Support Analyst-...

Day In a Page

Air strikes? Talk of God? Obama is following the jihadists’ script

Air strikes? Talk of God? Obama is following the jihadists’ script

The President came the nearest he has come yet to rivalling George W Bush’s gormless reaction to 9/11 , says Robert Fisk
Ebola outbreak: Billy Graham’s son declares righteous war on the virus

Billy Graham’s son declares righteous war on Ebola

A Christian charity’s efforts to save missionaries trapped in Africa by the crisis have been justifiably praised. But doubts remain about its evangelical motives
Jeremy Clarkson 'does not see a problem' with his racist language on Top Gear, says BBC

Not even Jeremy Clarkson is bigger than the BBC, says TV boss

Corporation’s head of television confirms ‘Top Gear’ host was warned about racist language
Nick Clegg the movie: Channel 4 to air Coalition drama showing Lib Dem leader's rise

Nick Clegg the movie

Channel 4 to air Coalition drama showing Lib Dem leader's rise
Philip Larkin: Misogynist, racist, miserable? Or caring, playful man who lived for others?

Philip Larkin: What will survive of him?

Larkin's reputation has taken a knocking. But a new book by James Booth argues that the poet was affectionate, witty, entertaining and kind, as hitherto unseen letters, sketches and 'selfies' reveal
Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?

Waxing lyrical

Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?
Texas forensic astronomer finally pinpoints the exact birth of impressionism

Revealed (to the minute)

The precise time when impressionism was born
From slow-roasted to sugar-cured: how to make the most of the British tomato season

Make the most of British tomatoes

The British crop is at its tastiest and most abundant. Sudi Pigott shares her favourite recipes
10 best men's skincare products

Face it: 10 best men's skincare products

Oscar Quine cleanses, tones and moisturises to find skin-savers blokes will be proud to display on the bathroom shelf
Malky Mackay allegations: Malky Mackay, Iain Moody and another grim day for English football

Mackay, Moody and another grim day for English football

The latest shocking claims do nothing to dispel the image that some in the game on these shores exist in a time warp, laments Sam Wallace
La Liga analysis: Will Barcelona's hopes go out of the window?

Will Barcelona's hopes go out of the window?

Pete Jenson starts his preview of the Spanish season, which begins on Saturday, by explaining how Fifa’s transfer ban will affect the Catalans
Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape