The latest National Dialogue on Entrepreneurship newsletter highlights Scott Shane’s new work arguing that we have overrated the role of Angels in new ventures.
A new US Small Business Administration Office of Advocacy-sponsored research report assesses the role of angel investors in funding new entrepreneurial ventures. The report is critical of existing analyses of the scope and scale of angel investing in the US. It finds that the angel capital market is smaller than previously estimated, and that most angel-backed firms are not potential high-growth start-ups (emphasis added). Instead, they share similarities with many other established small firms. For example, angel backed firms had been operating for an average of more than 13 years, and that the largest portions of angel investing occurred in the retail (25% of all investments) and personal service (12.5% of all investments) sectors. While the report includes a number of cautions about the size of angel capital markets, it does acknowledge that angel investing remains a significant activity. Between 2001 and 2003, angel investors backed anywhere from 50,000 to 57,000 companies for a total annual investment of $23 billion.
Download the September 2008 US Small Business Administration Office of Advocacy-sponsored working paper, The Importance of Angel Investing in Financing the Growth of Entrepreneurial Ventures.