The UK must establish ‘angel academies’ for private investors in order to grow critical sources of funding for new ventures, according to a new study.
The report into business lending discovered that would-be and novice angels need to be urgently provided with opportunities to actually “learn the art” of angel investing.
According to researchers from Queen’s University Management School, who conducted the study, angel investors are crucial in helping drive entrepreneurial activity, in particular for start-up and early stage businesses. Furthermore, angels account for between £400m and £500m of early stage investments in Britain, making them the largest source of early stage capital investment in the country.
Professor Richard Harrison, from Queen’s University said: “Business angels are recognised as pivotal to the stimulating entrepreneurial activity. Not only do they provide the risk capital that is necessary for growth of early stage, high potential start-ups, but their hands-on involvement in the businesses in which they invest also strengthens business capacity to manage and absorb growth.”
The study, which was based on data collected from 12 business angels, with a mix of experience, indicated three major ways in which angels learn: listening to and observing business angels, gaining experience, and from ‘learning events’ – most notably failed investments.
Professor Harrison added: “Our study makes it clear that angels are on a steep learning curve, gaining knowledge from their very first investment, and learning from every subsequent one. It is vital that they are given opportunities to share these experiences so they are not put off making further investments, and also to learn from other investors about how to focus and discriminate in order to make the quick, effective, business decisions needed in future.”
© Crimson Business Ltd. 2010