Chapter 2. The role of business angel investments in SME finance1

This chapter examines the role of business angel investments as a source of finance for SMEs and entrepreneurs, emerging trends in the market and recent policy developments to stimulate angel activities. The chapter also collects and analyses the coverage and comparability of available data on business angel investments, with a look to strengthen evidence-based policy making in this area.


Business angels have an important role to play in the financial ecosystem for SMEs

The chapter starts by outlining the growing role business angel (BA) investors play in the financial ecosystem, especially for innovative, high-growth firms. It describes emerging trends in angel activities, followed by a section on recent policy developments and government measures in support of business angel investments. The fourth section discusses challenges in the measurement of angel activities and underlines the need to improve the evidence base in order to get a better understanding of the size and functioning of the angel market in different countries.

Business angels are individual investors, usually with business or managerial experience, who invest their own personal funds in enterprises at their early and risky stages. Business Angels Europe (BAE) and the European Trade Association for Business Angels, Seed Funds and other early Stage market Players (EBAN) define a business angel as follows:

“An individual investor (qualified as defined by some national regulations), who invests directly (or through his/ her personal holding) his/ her own money, is financially independent (i.e. a possible total loss of his/ her Business Angel investments will not significantly change the economic situation of his/ her assets), invests predominantly in seed or start-up companies with no family relationships, makes his/ her own (final) investment decisions, invests with a medium to long term set time-frame, is ready to provide, on top of his/ her individual investment, follow-up strategic support to entrepreneurs from investment to exit, respecting a code of ethics including rules for confidentiality and fairness of treatment (vis-à-vis entrepreneurs and other Business Angels), and compliance to anti-laundering.”

The above definition excludes investments made by family and friends, where the reason to invest is often motivated by non-financial reasons. Angels also invest as individuals (although they often co-invest with others), and are therefore distinct from venture capitalists, who operate through companies that pool money from different investors. Compared with venture capital institutions, which manage funds provided by limited partners, business angels invest at earlier stages of a firm’s life cycle, provide fewer funds per deal on average, and invest in a wider range of businesses in terms of sector and geography (Mason and Harrison, 2015). Angel investors typically provide the first round of equity capital after funds from friends and family have been exhausted, thereby addressing a well-acknowledged financing gap.

As the above definition highlights, angel investors provide services beyond financing, such as mentoring, business advice and access to networks, and can therefore play a central role in the ecosystem for start-ups, especially for innovative firms. Moreover, ventures funded by angel investors have proven to be more successful than those that have been rejected, as evidenced by their survival rates and the evolution of their employment. The data suggests that their services beyond financing are key to the success of ventures (Kerr et al., 2011)2 .

There is also evidence that angel activities are relatively resilient to changes in market cycles. In contrast to both venture capital investments and bank credit, business angel investments held up relatively well in the aftermath of the 2008-09 financial crisis and have gained further traction in recent years in many countries. In the United States, for example, survey data suggest that there has been an increase of angel activities since 2012 when the JOBS act (Jumpstart Our Business Startups Act) was signed into law, reaching a total estimated size of USD 24.1 billion in 2014. The number of active angel investors was estimated at 316 600 individuals, each investing an average of USD 328 500 (ARI, 2015 and Sohl, 2015). In the United Kingdom, business angel investments in 2012 and 2013 were also up in comparison with previous years (Deloitte and UK Business Angel Association, 2014). By one estimate, angel investments in Europe increased by 8.7% between 2012 and 2014 (EBAN, 2014b).

Furthermore, data on venture capital investments illustrate that, in some developed economies, venture capital investors are increasingly moving into investment opportunities at later stages of the business cycle, and becoming less active in financing start-ups.3 Angel investors therefore have an important role to play as providers of equity capital in the early stages of firms’ lives, and hence for the success of the entrepreneurial economy. The central role of business angels is increasingly recognised by policy makers across the OECD and beyond, and initiatives to support angel activities have expanded in recent years as part of a broader shift towards policies that aim to make equity-type instruments more widely available for start-ups and SMEs (OECD, 2015a).

Trends and developments in angel activities

This section provides a general indication of trends in angel investments in the visible part of the market, i.e. investments made through an angel network or syndicate, and therefore registered (see Box 2.1). As Section 2.4 describes, however, many angel investments take place outside of networks and other portals and are inherently difficult, if not impossible, to measure and study.

Box 2.1. Business angel networks and syndicates

Business angels often operate in networks, private or semi-public organisations, which are usually active at the regional or national level. These networks function primarily as a matchmaking service between investors and entrepreneurs, but do not make any investment or investment decision themselves. They address information asymmetries between investors and entrepreneurs by enhancing the flow of information, and have become increasingly active in capacity building, both for (potential) business angel investors to improve their investment skills, as well as for small businesses seeking funding, by boosting their investor readiness.

A syndicate is an association of at least three high net worth individuals or sophisticated investors who invest together. Syndication can occur on an ad hoc, deal-to-deal basis as part of a business angel network, when several investors are interested in funding the same venture. In that event, a lead investor is typically identified who coordinates efforts and negotiates on behalf of the syndicate. Alternatively, a more formal syndicate structure can be established when the same group of people co-invest on a more regular basis. It is important to note that every individual investor remains responsible for his or her own investment decision and that the association does not exercise investment discretion at any point in the process.

The advantage of investing through a syndicate is not limited to sharing risks and enabling investment in a diversified portfolio of ventures, even with limited resources. Syndicates also serve as a repository where investors pool their capital, skills, contacts, and experience for the benefit of all members. Of particular relevance in that respect is that associations can carry out appropriate due diligence for their members, ranging from screening business plans at an early stage, to complying with relevant regulation. Syndicates usually cover their costs by charging a fee to their members.

Source: OECD (2011).

Angel activities within networks and syndicates are on the rise

The data on the visible part of the market indicate an increase in business angel investments in recent years. Between 2011 and 2012, angel investments rose by 7.5% in the EU 28, and by a further 8.7% in 2013 year on year (EBAN, 2014). Similarly, angel investments in the United States rose by 8.3% year on year in 2013, and the number of investors by more than 11%, to 298 800 individuals. These numbers pertain only to angel activities within networks and are therefore only indicative of general trends in the market.

Table 2.1 shows a general upward trend in angel activities between 2007 and 2013. The financial crisis appeared to have an impact on angel investments within networks in countries such as Belgium, Ireland, Portugal and the United States, where activities declined substantially between 2007 and 2008. Activities picked up in subsequent years, however, and either surpassed 2007 levels (e.g. in Ireland and Portugal), or were close to pre-crisis levels in 2013 (e.g. in Belgium and the United States). It is important to note that these data are collected via surveys from networks and are therefore not representative of the overall market. Moreover, as the share of angel investments within networks to total BA activities cannot currently be measured and may vary significantly across countries, the information from Table 2.1 does not lend itself to cross-country comparisons in terms of overall market size. Section 2.4 of this chapter discusses data issues in more depth.

Table 2.1. Total business angel investments within networks in selected countries, 2007-13











EUR million









EUR million









CAD million







EUR million









EUR million









EUR million









EUR million









EUR million








The Netherlands

EUR million









EUR million









EUR million









EUR million









EUR million








United Kingdom

EUR million








United States

USD billion








Source: Centre for Venture Research, EBAN, NACO.

In the EU 28, the number of active business angel networks increased substantially in the last 15 years, from less than 150 in 1999 to more than 200 in 2007, and to 465 in 2013 (EBAN, 2014). In the United States, the number of active business angel groups also expanded from around 100 in 1999, 300 in 2008, to close to 400 in 2013 (ACA, 2014).

Although data from emerging economies is generally not available, evidence points to rising activity levels in angel investments in these markets as well, albeit often from low levels. Box 2.2 provides more information about BA investments in emerging markets.

Box 2.2. Angel investing in emerging economies: The Chilean experience

Obtaining reliable and comparable data on angel activities in emerging economies is even more difficult than in high-income countries. Nonetheless, available evidence suggests that angel activities are gaining traction in low-and middle income countries as well, although often from low levels. In 2013, 21 networks were active in Latin America, most of them founded after 2005. In emerging economies in Asia, angel groups are active in India, Indonesia, Malaysia and the Philippines, among other countries. Business angel activities in China are developing quickly, and the government is testing strategies to support this nascent industry. While angel investors from Africa and the Middle East struggle to find high-quality deals and most countries in this region lack established angel groups (with the exceptions of Israel and South Africa), some angel markets have been formalised in recent years (World Bank, 2014).

The Chilean experience may provide useful insights for many emerging economies. The Chilean Government has provided financial support to 12 angel networks in the country since 2006, through its development agency CORFO, and continued to financially support three of them in 2015 (Chile Global Angels, Dad Neos and Mujeres Empresarias)4 . In total, there were a total amount of CLP 2 882 million in subsidies approved and CLP 1 594 million already extended between 2006 and 2015. Yet angel activities remain limited in Chile, despite the active involvement of the government, considerable numbers of wealthy individuals with capital to invest, the relatively favourable business environment for private equity, and stable macro-economic foundations (compared to other Latin American countries). Between 2010 and the first half of 2015, the existing networks Chile Global Angels and Dad Neos invested a total amount of USD 4.6 million in 22 projects.

Factors that explain this relative dearth of angel investments include the wide distrust of the general population in equity investments, especially in the early and risky stages of the life cycle of a firm, the lack of expertise in angel investment, the reluctance of entrepreneurs and business owners to let external financiers participate in the management of their business, and the absence of angel activities outside of the Santiago metropolitan area, Chile’s capital. Research suggests that the limited number of “investor-ready projects” stands out as a primary reason for the incipient and precarious position of the business angel market in Chile, however. As a policy implication, supply-side measures for the business angel market would benefit from complementary demand-side policy initiatives to stimulate the equity culture of Chilean entrepreneurs, make them more aware of the possibilities that angel investing has to offer and provide training programmes to entrepreneurs and (prospective) angel investors alike (Romaní, Atienza and Amorós, 2013).

These barriers to the development of the business angel market are widely shared by other countries both within the emerging world and in OECD countries, and explain to some extent why business angel activities continue to remain underdeveloped in some countries compared to others (see, for example, OECD, 2015b or Wilson, 2015).

Angel investing generates a sizeable, albeit skewed, return on investment and has a significant business impact on investee companies

There is only limited data available on the return on investment for business angels. Both, anecdotal and empirical evidence strongly suggests that distribution of returns is strongly skewed, however, with a large number of investments yielding negative results and a small minority being very successful, as is generally common in early stage investments. A large-scale survey by the Angel Capital Association (ACA) in the United States, for example, revealed that while the average return of angel investments in the studied sample totalled 2.6 times the investment in 3.5 years, 52% of all exits from investments returned less capital than was originally invested and were thus loss-making. At the other end of the distribution, 7% of exits returned a capital of more than 10 times the initial investment and accounted for three-quarters of net returns in US dollars. Returns were positively associated with the number of hours spent on due diligence, the experience of the investor and the interaction with their portfolio companies, including coaching and mentoring activities, strategic consultation, and monitoring financial information (Wiltbank and Boeker, 2007).

A UK study based on survey data led to similar results. The average angel investment generated 2.2 times the capital invested upon exit, even though 59% of all business angel investments failed to return capital. 9% of deals generated more than 10 times the invested amount and accounted for almost 80% of the net returns. Investors who spent more time on due diligence, had more experience and who were actively involved in the venture they funded, were more successful on average (Wiltbank, 2009).

Similarly, there is only limited evidence of the impact of investments by angel investors on the businesses they invest in. Interviews with the management of investee companies suggest that they perceive the funding and involvement of angel investors as broadly positive. A majority of interviewed managers in a 2009 study confirmed that their funding gap would be much more problematic in the absence of the angel investment. They also perceive that the investment by angels made their project more credible for other potential financiers and thereby facilitated access to other sources of finance. Moreover, the post-investment involvement of angel investors, as well their professional network, were often seen as beneficial by the management of the investee company (Macht and Robinson, 2009).

A survey undertaken in France paints the same picture. A clear majority of surveyed business owners financed by angel investors reported that they would not have been able to find alternative sources of finance otherwise (and many of them indicated that the investments by angels were insufficient to cover their needs). There was broad agreement that the equity gap was real and had become more pronounced over time, especially for companies competing in global markets, which often required larger investments at the early stages of their existence (DGCIS, 2012).

Empirical research on the business impact of angel investments remains rare, however, particularly due to the unobserved heterogeneity of entrepreneurs.5 A select few studies indicate that angel investments do have a real impact on the businesses in which they invest. A 2011 study using US data found that angel-financed ventures were more successful, as measured by their survival rate, their ability to attract other sources of finance, and their growth, controlling for other factors. This effect was particularly strong when the investor took a more active role in the venture (Kerr et al., 2011).

The importance of active involvement in the investee company was also highlighted in a large-scale survey among the UK business angel community. Although investors attribute previous unsuccessful deals to a variety of factors, the lack of alignment between the angel investors and the management team with respect to the execution of the business plan, the lack of effective reporting by management to the angel investor and not being able to offer strategic advice were commonly cited as reasons why an investment did not return positive returns on exit (Wright et al., 2015).

Another study broadly confirms these results. An analysis of 13 angel groups in 12 countries found that angel investing usually increased the performance, growth and probability of survival of the investee company (Lerner et al., 2015). A 2014 study within Europe tracked 1 661 companies across 37 European countries which were financed by one or several business angels for a period of four years. The study reports that employment more than tripled, while revenues and asset size increased by 150% and 156%, respectively. The majority of tracked enterprises were not able to make profits within the three years after the investment took place, confirming the finding that returns on investment are very skewed (EBAN, 2014).

A French study found somewhat different results. On average, ventures that received investments were less performant in terms of net revenue, turnover or value added than a control group of enterprises with similar observable characteristics that were not financed by angels. This can be largely explained by the overall riskiness of the former. A higher proportion of these investee companies were indeed loss-making, and this effect was also not fully compensated by the finding that the most successful investee companies who had received angel finance outperformed the most successful enterprises in the control group (DGCIS, 2012).

Co-investment has become the norm

Given this skewed distribution of returns on investment, an increasing majority of angel investors are co-investing with other early stage investment players so as to diversify risks. Co-investment usually occurs with other business angels, either on an informal basis or through syndicates (see Box 2.1). In 2013, 73% of all American angel investors co-invested within a group of syndicates, up from 67% in 2011 (ACA, 2014). In the EU 28, only 3% of known angel investors do not-co-invest with other investors. In addition to investing alongside other angels (which occurred for 57% of all investments in 2013), angels also co-invest with (in increasing order of importance within the EU 28) public funds, venture capital funds, early stage funds and other types of investors (CSES, 2012). The picture is similar in Canada, where joint investments with angels in the same group occurred in 65% of the deals and joint investments with investors outside of the group, often with non-angel financiers such as VC firms or the government, occurred in 75% of the deals in 2014 (NACO, 2015).

Crowdfunding platforms and other vehicles to find investment opportunities are also being used more widely as a means to find investment opportunities, thereby allowing angel investors to make investments in a wider geographical area. In the United Kingdom, for example, a large-scale survey illustrated that 45% of all respondents made investments through crowdfunding platforms in 2014. Younger and less experienced angel investors are much more likely to make use of crowdfunding platforms (Wright et al., 2015). A similar development is noted in other European countries, where some equity-based crowdfunding platforms aim to operate at an international level, enabling investment in promising ventures outside of their home country. These platforms are increasingly trying to engage venture and angel investors. Some established business angel networks and syndicates are also using crowdfunding-type technology for their organisation (European Commission, 2014). In Canada and the United States, equity crowdfunding is only legal for high net-worth individuals, so-called “accredited investors”6 , who share many of the typical characteristics of business angels. Box 2.3 provides an example of a crowdfunding platform that enables business angel investors to find investment opportunities.

Box 2.3. Go Beyond Investing

The Go Beyond Investing (GBI) platform illustrates how crowdfunding techniques could shape the angel industry. Go Beyond serves as a syndication vehicle for small investment tickets, enabling individual investors to build up a diversified portfolio of investments in growth companies at their early stages through its platform/ network. The Swiss-based organisation operates in multiple European locations and in the United States. It is one of the few diverse communities of angel investors with an international portfolio of investments. The organisation screens potential investment deals, the most promising go through a due diligence procedure, and a select few are subsequently offered as investment opportunities to its members who make investment decisions individually. Its investor community includes 198 investors worldwide, investing a total of CFH 2.8 million in 2014, sharply up from CFH 100 000 in 2008, the first year of existence. The organisation also provides training sessions for its investors, who are encouraged to take a portfolio approach and invest in multiple companies, thereby making overall returns on investment more predictable. Results so far indicate that a clear majority of investors made positive annualised returns.

Source: Go beyond early stage investing (2015).

As a result of the institutionalisation of the business angel industry and the increasing popularity of joint investments in mature markets, larger amounts are being invested on average, and in companies beyond the seed stages of their life cycle (Carpentier and Suret, 2014).

Research also indicates that ventures which have been financed generally find it easier to attract follow-up financing such as venture capital and other sources of risk capital. Angel investing thereby serves as a sort of gateway or accreditation mechanism for other financiers at later stages of a firm’s life cycle. In addition, there is also a marked difference in the selection of firms that apply for angel investments, depending on the development of the entrepreneurial ecosystem and the “entrepreneur-friendliness” of the economy. Firms in countries with less developed financial markets and/or a less friendly environment for entrepreneurs tend to apply for angel funds only in later stages of their development. These factors also play a role in the average size of investments made by business angels, providing evidence of the importance of the overall entrepreneurial ecosystem’s health for angel activities (Lerner et al., 2015).

The profile of angel investors is becoming more diverse

The typical profile of a business angel is a middle aged male with an above average education, a professional or business career background, and with experience in running a business and/or the management of organisations. In addition, angel investors also have above average personal net worth. Although this typical profile has not changed over time, there are indications that women angels are becoming more common and that the median age of angel investors is decreasing. In the United Kingdom, for example, 14% of business angel investors were female in 2014, double the proportion of 2008. Whereas the median age in 2008 stood at 53 years, close to half of all investors in 2014 were aged 45 or younger (Wright et al., 2015). In the United States, woman angels represented a record 26% of the total market, while minority investors, while still accounting for only 8% of the total angel population, also reached record highs in 2014 (Sohl, 2015).

Achieving timely exits is crucial for a vibrant business angel market

Most angel investors seek an exit or liquidity event at which they hope to make a profit. This may occur in a number of ways and will usually be dependent on key milestones, such as the business hitting certain levels of profitability and growth targets, but there is no general blueprint. Typical exit options are the sale of shares, sale of the enterprise or IPOs (Initial Public Offerings), but also the closure of the enterprise, which occurs relatively frequently and generates negative returns. Timely exits with positive returns are likely to attract new potential angels and generate liquidities for further investments; they are thus a major determinant of a vibrant entrepreneurial ecosystem (Mason and Botelho, 2014). For angel investors, knowing when to exit, and having the will to do so even in the case that the exit is negative, is as critical as making the initial investment decision (Schwienbacher, 2009).

The practitioner community identifies the difficulty in achieving exits as one of the most current and pressing problems for investors. Indeed, whereas angel investment activity has been stable, or even increased, since the onset of the financial crisis (Sohl, 2012; Mason and Harrison, 2015), practitioners report that there is now a major problem in achieving timely exits. A main challenge for a number of angel groups is the length of time to exit which has risen considerably in recent years, reportedly from three years in 2005 to about ten years or more in 2013 (Mason and Botelho, 2014). Such long investment time horizons hold back angels from re-investing in new companies and can also be a source of concern for existing and potential new angels.

The importance of exits and exit markets should also be taken into account by policy makers. The growth of co-investment funds around the globe as a means of addressing supply-side gaps in the availability of start-up and early growth capital (Mason, 2009; OECD, 2011) means that achieving exits is now also a significant issue for governments, especially since such funds are intended to be evergreen. Yet, while vibrant stock markets are critical for successful IPOs and the development of the venture capital market (Black and Gilson, 1998), it is not clear how policy can encourage exit for angel investors. Still, there are some actions that can be taken. These include lowering the costs of going public (Ritter, 2013), as well as measures that reduce the length of time between investing and exiting, processes of consultation, and considering the needs of BA when new regulations are introduced.

Policy initiatives for angel investment

Whereas policy making in Europe and the United States has long focused on the venture capital market, public support to business angel investing has become more popular in recent years (Mason, 2008; OECD, 2015a). Support specifically aimed at business angel investments broadly comes in the form of three policies; support in matching demand and supply, usually by logistical and/or financial support for the creation and operation of business angel networks and federations, tax policies, and co-investment schemes (CSES, 2012), which will be discussed in more length in the sections below (see also Boxes 2.4 and 2.5 on recent policy initiatives to stimulate the BA market in Turkey and Korea, respectively). In addition to these supply-side policy measures, demand-side actions, mostly in the form of improving financial skills of entrepreneurs, matter greatly to business angel activities. The lack of financial knowledge and vision is indeed identified as a key obstacle to the development of financial instruments other than straight debt and is discussed further in Section 2.3.4 (OECD, 2015b). Moreover, business angel investments can benefit from solid framework conditions, such as conducive labour laws, product market regulation, competition policies, foreclosure and bankruptcy regulation, the promotion of an entrepreneurial culture, as well as the development of well-functioning financial markets.

Box 2.4. Government support for angel investments in Turkey

Turkey introduced a tax deduction for licensed business investors as part of a wider law regarding the regulation and promotion of business angel investments. This law was enacted in 2012 and secondary legislation came into force on 15 February 2013. It provides a legal framework for licensing business angels, with the aim to increase the availability of equity financing for SMEs for which traditional debt financing is not well suited. It aims to institutionalise business angel investments, and improve business culture and ethics in the angel investment market. Furthermore, licensing is expected to improve the data collection regarding business angel operations in Turkey.

According to the law, licensed business angels can deduct 75% of the capital that they invest in innovative and high growth SMEs from their annual income tax base. The 75% deduction rate will be increased to 100% for those investing in SMEs whose projects were supported by the Ministry of Science, Industry and Technology, the Scientific and Technological Research Council of Turkey (TÜBİTAK) and Small and Medium Enterprises Development Organization (KOSGEB) in the last five years. The licenses are valid for 5 years, and the tax deduction will be applied until 2017 with the option to extend it for another five years.

Certain eligibility conditions must be met. The SMEs’ shares cannot be traded on the stock market, and the acquired shares must be held for at least two years. Moreover, the tax deduction only applies to investments in businesses with annual net sales of TRY 5 million or less, and with 50 employees or fewer. Between February 2013 and July 2014, 243 business angels were licensed out of 261 applicants. In the same period, 6 investments were made for a total of TRY 2.75 million benefitting from the tax incentive.

Source: OECD (2015a).

Box 2.5. Fostering a creative economy in Korea: the role of business angels

Since the height of the dotcom bubble, the number of business angel investments declined dramatically from KRW 549 billion in 2000, to a low of KRW 29.6 billion in 2011. The number of angel investors fell from almost 29 000 to 619 over the same period. Since then, the numbers have steadily increased, but remain well below 2000 levels. The Korean government sees fostering a “creative economy” as a main priority and is trying to stimulate start-ups, especially in the technological sector. It is therefore seeking to further revitalise the business angel market as part of a wider strategy to increase the availability of equity instruments used by newly created enterprises.

Government support for angel investors includes a tax deduction for investments of up to KRW 50 million, which has been increased from 30% to 50%. The deduction limit on annual earnings has been similarly raised from 40% to 50%. Angel investors also receive tax benefits and can defer tax payments when reinvesting their returns in other business ventures. In 2011, Korea’s Small and Medium Business Association (SMBA) established the Angel Investment Support Centre, which aims to find and develop angel investors and support their activities. The SMBA has also raised KRW 70 billion for an Angel Investment Matching Fund, matching the investments of different angel investors under certain conditions.

Moreover, the SMBA officially certified 11 start-up companies with investments from individual angel investors as venture companies in September 2014. This legal status grants additional tax benefits and eligibility for support in various areas, such as government-backed credit guarantees. Professional angel investors in Korea are defined as investors whose investment in stocks or equity newly issued by a venture firm, a founder, or an innovation-oriented company exceeds KRW 100 million for the past three years.

As a result of this measure, investments by business angels, which totalled KRW 1.1 trillion in 2013, rose to KRW 1.4 trillion in the first half of 2014. The government expects that total investments will surpass KRW 2 trillion in 2017.

Source: OECD (2014), OECD (2015a).

Tax policies

Specific fiscal incentives for angel investors in the form of reductions on tax rates or tax credits are not uncommon throughout the countries participating in this report. Table 2.2 provides a non-comprehensive overview of tax incentives for angel investors in 12 countries. In addition to these schemes at the national level, other countries such as Canada7 and the United States provide tax incentives at the state or regional level. In the United States, 32 states offer tax credits to angel investors, ranging from 15% to 50% of the amount invested and with varying eligibility criteria (Carpentier and Suret, 2013). Furthermore, several countries have adopted tax incentives for investors in SMEs and start-ups which do not target angel investors specifically, such as R&D allowances or tax allowances for invested earnings, but which often benefit angel investors and which are not listed in Table 2.2.

Table 2.2. Overview of fiscal incentives for angel investors



The “tax shelter” provides a tax reduction of 45% in the personal income tax for investors in a start-up. To benefit from the tax reduction, shares must be held for four years.


50% of investments made in the share capital of the qualifying company can be deducted from the annual capital income of private investors.


Tax reduction of 18% of the amount invested with the limit of EUR 50 000 and a reduction on the wealth tax by 50%.


Under the Employment and Investment Incentive Scheme (EIIS), a tax relief of 30% (possibly increased to 41%) on investments up to a maximum of EUR 150 000 per annum is provided.


Angel investors may deduct a qualifying investment of up to NIS 5 million from their total taxable income.


Capital gains realised by business angels (resident and non-resident), not engaged in a business activity to which the participations are effectively connected, are tax-exempt.


Angel investors can deduct from their taxable income up to a limit of JPY 10 million.


A tax deduction of 50% for investments of up to KRW 50 million.


Angel investors are eligible for a tax deduction on their aggregate income after two years of their shareholding period in a qualified investee company.


Angel investors can claim a deduction on the individual income tax of 20% of the investment made.


75% (and even 100% for specific projects) of the capital invested in innovative and high growth SMEs is tax deductible from the annual income tax base.

United Kingdom

Up to 30% tax break to investors for investments up to GBP 1 million as under the Enterprise Investment Scheme (EIS). Possibility to defer tax liability on existing capital gains reinvested into EIS-qualifying shares.

Source: Carpentier and Suret (2013), EBAN (2012), Fiban, Mban, OECD (2015a), Wilson and Silva (2013).

Empirical studies about the effectiveness and usefulness of tax incentives for angel investors are scarce. Even when programmes have annual filing conditions for investors and businesses in order to be eligible for government support, data on who benefits from tax incentives for angel investors, the companies they invest in, and on their characteristics and performance, are not always systematically collected and studied. Moreover, it is difficult to establish a causal link between the existence of tax incentives, angel investments, and economic outcomes of the firms that received angel investments, such as net job creation.

Nevertheless, the longstanding experience of the UK Enterprise Investment Scheme (EIS) is well studied and generally considered as an example of a tax incentive with broadly positive results. An evaluation showed that investments made under the EIS were positively associated with business performance, fixed asset formation, sales turnover, employment and labour productivity, although the effects are rather small (Cowling et al, 2008). Mason (2009) confirmed the positive impact of the EIS on the companies that received investments, and according to a 2008 survey by Wiltbank (2009), 24% of angel investments would indeed not have taken place in the absence of the favourable tax treatment.

Evidence from other countries points in the same direction. A recent study examined the effects of tax incentives for angel investors in two American states, Maryland and Wisconsin, and the results suggested that the tax credits in place were cost effective and had a net positive impact in terms of leveraged capital, local employment, and earnings. An important caveat is that the researchers considered the tax credits in these states to be well designed and managed (in contrast to some other states) and that this was crucial for obtaining positive results (Tuomi and Boxer, 2015). An evaluation conducted by the “Department of the Minnesota House of Representatives” of the “Angel Tax Credit” in the US state of Minnesota produced similar results. As part of this evaluation, a large-scale survey of the beneficiaries revealed that almost half (48%) of them would not have made the investment without the tax credit and a further 34% would have invested less (Minnesota Department of Revenue, 2014).

Policy experiences with tax incentives for angel investors have not been always positive, however. The Netherlands and Sweden recently abolished their tax incentives out of concern about the cost effectiveness and, especially, the additionality of tax incentives, i.e. the proportion of investments benefiting from a tax scheme that would not have taken place in the absence of a policy intervention. In addition, providing tax credits to relatively wealthy individuals to boost their expected return on investment is politically sensitive. A stronger evidence base is required to be able to better discern good practices concerning tax incentives for angel investors, and resolve the longstanding debate about its additionality.

Public-private co-investment schemes

A 2014 study identified 77 co-investment and business angel funds across Europe, 17 of which are private angel funds and 47 public-private partnerships. European angel investment funds and co-investment funds have an average size of EUR 22 million (although 70% of them have a budget of less than EUR 10 million). In total, these funds co-invested for an average amount of EUR 0.76 million in each deal. Most commonly, the public participation matches the amount of money which is privately invested and the repayment ratio is proportionate. Although some variation exists within Europe, both with respect to the leverage ratio and to the repayment ratio, around 80% of all co-investment funds have equal terms for the private and the public sector (EBAN, 2014a).

Table 2.3 compiles a list of countries where public-private co-investment schemes are in place. Of 37 countries participating in the Scoreboard on SME and entrepreneurship finance, at least 17 have established such a partnership8 .

Table 2.3. Co-investment funds for business angels


The European Angels Fund S.C.A. SICAR - aws Business Angel Fonds (Austria) (“EAF Austria”) is an EUR 22.5 million initiative funded by EIF and Austria Wirtschaftsservice GmbH (aws) - the Austrian government promotional bank financing companies based in the country in the form of equity co-investments. It was established in December 2013.


The NAUSECAA Ventures Fund was created in 2009. It focuses on investment rounds between EUR 1 million and EUR 4 million and has a size of up to EUR 20 million. It brings together 35 private investors and selected institutional investors.

Belgium (Flanders)

The ARKimedes-Fonds II has a fund size of EUR 100 million, and offers one euro extra for each euro invested by accredited risk capital funds (so-called ARKIVs) in Flemish starters and SMEs.


The Estonian Development Fund, created in 2012, is a public EUR 30 million fund. The presumed investment period is five years and each SME may get up to EUR 1.5 million investment tranche every 12 months. Their participation may range up to 70% of the total investment.


Finnvera’s Seed Fund Vera Ltd is a EUR 123.6 million public-private fund (95% public, owned by Finnvera plc) that was established in 2005.


Angel Source, created in January 2012, is the first national fund for co-investments devoted to business angels investing in France, mostly in ICT and digital industries. They generated EUR 30 million in their initial fundraising and first fundings range from EUR 500 000 to EUR 1.5 million.


JEREMIE fund is a joint venture, where a maximum of 70% of the funds come from the EU, with the remainder coming from the private investor.


The Ingenium Sardinia is a public-private seed capital fund. It is EUR 34 million in size (50% invested by the region and 50% from the fund managers) and was created in 2009 for the duration of 10 years. Ingenium Emilia Romagna and Ingenium Catania also exist.


The Korean Angel Investment Matching Fund helps BA and angel clubs to provide financial support to start-ups through the Korean Ventural Investment Corporation (KVIC), a governmental fund for the Korean venture capital market. In this public-private partnership, KVIC will provide up to KRW 2 billion (when partnering with an angel club providing up to KRW 50 million), and up to KRW 200 million (when working with an individual angel investor that can invest up to KRW 20 million in funds).


In the Netherlands, a successor of the TechnoPartners Seed Facility is the Seed Facility of RVO. In this public-private partnership (50% Dutch government - 50% private investors), the government doubles the investment that is made with a loan, up to a maximum of EUR 4 million.

New Zealand

The New Zealand Seed Co-Investment Fund (SCIF) invests in seed and early stage firms alongside selected private sector investors, usually business angel networks at a 50/50 rate.


The COMPETE platform was renewed in February 2014 and now totals a EUR 26 million fund (EUR 21 million from the initial COMPETE, and an additional EUR 15 million in 2014). The new platform requires a minimum number of 3 BA to coinvest, with the public/ private investment ratio currently at 1.85/1. The maximum amount of public money allowed per investment vehicle is EUR 1 million.


Created in 2012, the Moscow Seed Fund works as a public-private partnership (66% on the Department of Science, Industrial Policy and Entrepreneurship in Moscow and 33% on the private investor) that is EUR 6 million in size.


META Ingenium d.o.o. is a EUR 10 million fund created in 2010. It provides equity funding to companies with an international ambition. It benefits from direct access to international investors and 30% of its funds can be used for cross-border investments.


The European Angels Fund – Fondo Isabel La Católica – is a EUR 30 million initiative funded by the EIF, Instituto de Crédito Oficial (ICO) and Neotec, set up to provide equity to business angels and other non-institutional investors for the financing of innovative companies in the form of co-investments, launched in December 2013.


Almi Invest is a public venture capital company, currently managing a total of SEK 1 100 million with funds from the EU (up to 50%), regional owners (up to 25%) and ALMI AB (up to 25%).


STING capital is a EUR 8.9 million public-private partnership created in 2005 that can invest up to EUR 0.4 million per company in ICT, cleantech and medtech enterprises. They work closely with STING Business Angels’ 35 individuals and have financed 26 companies so far (of which, so far, one was liquidated).


The Istanbul Venture Capital Initiative (iVCi) is a EUR 144 million joint initiative between the Turkish governmental agencies and the EIF, along with private institutional investors. It directly co-invests funds with angel investors and other early stage investors as well as in intermediary funds.

United Kingdom (England)

Angel CoFund was founded in 2011 and has since then supported 54 companies with initial investments that range from GBP 100 000 to GBP 1 million. It is a GBP 100 million investment fund that has, since its launch, committed an excess of GBP 24 million to companies along with GBP 95 million from BA and other investors.

United Kingdom (Northern Ireland)

Funded in 2010, the Halo EIS Funds is a EUR 400 000 private fund working on a pari passu ratio of investment with angels. UK EIS tax scheme forces the fund to invest 90% of its fund in a minimum of 4 companies within 12 months.

United Kingdom (Scotland)

The Scottish Co-Investment Fund is a GBP 72 million equity investment fund established by Scottish Enterprise, partly funded by the European Development Fund (40%) and partly by the Scottish Government (60%), in order to invest from GBP 10 000 to GBP 1.5 million in company finance deals of GBP 20 000 up to GBP 10 million.

United Kingdom (Wales)

Finance Wales, operating the Wales JEREMIE Fund, was created in 2009 and spans a 10 year reach life. It reaches EUR 189 million in overall funding - of which EUR 28 million belong to the co-investment sub-fund. For the 2014-15 financial year, the fund reported a GBP 25.5 million performance of their business investment funds, 16% above their target.

Source: EIF website, OECD (2015a), Wilson and Silva (2013), EBAN (2014).

Again, analysis of policy experiences lacks a strong evidence base and rigorous evaluation. The existing evidence shows a mixed picture. Denmark established a co-investment scheme in 2006 that went into operation in 2007. The scheme was abolished three years later after an evaluation by the Danish Investment Fund (Vaeksfonden). The take-up rate was deemed unsatisfactory, while the scheme incurred relatively high losses. Moreover, the workload in finding enough investor-ready projects and matching these projects with potential angel investors was much higher than anticipated (Tillväxtanalys, 2013). The Portuguese example was somewhat similar; as part of its “Operational Competitiveness Programme 2007-13”, the Portuguese Government established a co-investment programme for early stage investors (later renewed in February 2014). The contribution of this scheme to overcoming market failures with respect to early stage equity financing was not considered to be significant, as only a small number of operations were financed during the six years the programme was operational (PwC Portugal, 2013).

By contrast, the “Technopolis scheme” in the Netherlands, which ran from 2005-10, is generally considered successful. Through the seed facility, investors in risky ventures could secure a loan from the Dutch Government up to 50% of the fund’s investments, up to a maximum of EUR 4 million. Once revenues were generated, the fund would only have to pay back 20% until it earned back its investment. The scheme was thought to significantly boost private sector participation in technological start-ups, especially in the very early stages of their life cycle, with a high degree of additionality (Deuten et al., 2012). The Scottish co-investment scheme was also evaluated broadly as a success by the investor community and other involved parties and is the model on which co-investment schemes in some other countries or regions have been based. Survey data suggest that around half of the projects in Scotland co-financed by the government would not have been able to find capital elsewhere, whereas most of the other projects would be financed at worse terms and conditions. The programme is also considered to have had a tangible and sizeable net impact on the businesses it financed, as well as on the wider economy (Hayton et al., 2008). A common thread throughout these policy experiences is that co-investment funds are indeed able to catalyse the private market, but only if the existing angel market is sufficiently well developed, so that a sufficient number of investor-ready deals can be financed and the government does not have to be overly engaged in matching supply and demand for early-stage equity.

Logistical or financial support for the creation and operation of business angel networks (BANs)

In recognition of the crucial role Business Angel Networks (BANs) play in matching suppliers of equity with new ventures seeking finance, many governments have supported these intermediary organisations logistically or financially. In many countries, the government has reduced or even ceased its support after the early stages of development, after which BANs have become well established and self-sustaining (Mason, 2009).

In addition to BANs, governments have sometimes been instrumental in the development of a national federation or association of angels. These associations and federations raise awareness and visibility about angel investments to a wider public, collect and distribute data, provide training, mentoring activities and other services to (potential) investors, represent the sector to policy makers and aim to professionalise the industry by sharing good practices and developing professional standards (OECD, 2011)9 . Box 2.6 provides information about the activities of “France Angels,” the French national federation, as an example.

Box 2.6. France Angels: the national federation for the development of angel investing in France

France Angels was established in 2001 by five recently created Business Angel networks. Its goal was originally to promote BA investments, to recruit new investors and to professionalise the industry. To do so, the organisation develops tools, posts them on its website available for every member, and gathers useful business documents for network management and deal flow processing. It also created a forum to quickly answer to a variety of questions. Moreover, France Angels provides national and regional support and service by creating partnership and co-investment with seed and VC funds. France Angels organises around 40 events with over 3 000 participants a year and is also responsible for collecting data on the angel market in France.

France Angels has the objective of promoting angel investing to the national authorities in order to develop an angel friendly legal and fiscal environment. It supports the development of a positive eco-system of innovation and start-ups, together with a significant number of university research centres, valuation centres, incubators, accelerators, and the VC industry. France Angels seeks to contribute to the growth of the angel population (up to 4 500 members of 78 Angels networks, i.e. not including angel investors with no relationship to a network. The networks differ and are sometimes sector-specific, regional or university/ alumni-based, but all of them are non-profit organisations gathering 30 to 250 Angels.

Source: France Angels.

Supporting SME investor readiness

Investment readiness of an enterprise looking for finance can be defined as the capacity of the entrepreneur to understand what the investor would like to know and to be able to respond to his questions by providing appropriate information and by presenting a business model, which will be convincing for the investor (European Commission, 2006). Yet, at all investment stages, entrepreneurs frequently have difficulties in understanding the financing options available, as well as the expectations of potential investors, because they are either simply not familiar with the options for external sources of financing or they are not adequately prepared to present to investors (OECD, 2015b). Indeed, investors regularly express concern about the lack of sufficient investor-ready projects to finance, usually related to poor business models, flawed financial planning, deficient business strategies or bad communication skills on the part of entrepreneurs. Improving financial capabilities of business owners and entrepreneurs, for example through investment readiness programmes, can thus help address the entrepreneur’s side of the information asymmetry issue, which in turn can result in greater success in securing funding.

Investment readiness programmes therefore represent an area policy-makers have come to support in a number of countries. A questionnaire by the OECD conducted in 2012 showed indeed that many countries have created such programmes, usually run at universities, incubators/accelerators and/or by specialised agencies (Wilson and Silva, 2013). However, many programmes, especially publically funded ones, tend to focus almost exclusively on sources of finance and presentation skills (“pitching”), and less on the more pertinent business issues which are ultimately the determining factors for whether or not investors are willing to provide funding (Mason and Harrison, 2004). Survey data from Australia indicates that the majority of both nascent and young firms do not access these support programmes. However, it is unclear whether the low usage of these options is due to a lack of awareness or other reasons, e.g. perceived usefulness (OECD, 2011).

Although most training programmes are geared towards entrepreneurs, some also target investors and would-be investors, as being an experienced business owner and entrepreneur does not automatically translate into being a successful investor in early stage ventures. Training courses geared to (prospective) angel investors offer specific knowledge about deal screening and selection, including the correct valuation of the investee company, the due diligence process, legal procedures, the post-investment relation and the follow-up of the execution of the firms’ business plan.

Accelerator models, whereby entrepreneurial teams are selected on a competitive basis, mentored and supported to start a business, constitute another relatively recent policy development in this area. Accelerator models crucially differ from incubator programmes in their focus on human capital development rather than the provision of a (physical) infrastructure (Wilson, 2015).

There is a need to strengthen the evidence base on business angel investing

Despite the growing importance of angel finance, reliable data on the size of the market is relatively sparse. This can be attributed to its informal nature: compared to bank lending and venture capital activities, comprehensive data on business angel investments are lacking. Indeed, it will likely never be entirely possible to capture all angel activities, since many business angels wish to remain anonymous. As a result, much of the available evidence on angel activities is anecdotal. It often comes from surveys and may be inaccurate in part due to limited or unrepresentative samples of the overall angel population (Shane, 2012), which also might explain why angel activities sometimes receive less attention from researchers and policy makers than other sources of finance. Despite the longstanding existence of the angel investment phenomenon, the information necessary for evidence based research and policy making is thus still not available (Mason and Harrison, 2013).

There are numerous methodological difficulties involved in building an evidence base on angel activities. Investments are made by individuals who do not make up a known population. Investments made outside of BANs and syndicates are particularly hard to capture, although they are likely to account for the vast majority of all angel investments, up to more than 90% by some estimates (SCES, 2012).

Although there is a lot of agreement on the definition of an angel investor at the international level, practices in classifying angels from other investors differ from one study to the other. This reduces the comparability of evidence across and even within countries. In Sweden, for example, one extensive study on business angel investments was carried out in 2004 and another one in 2006, using two different definitions of what an angel investment constitutes. The narrow definition required that investors were fully independent from the business they invested in, the amount invested reached a certain threshold and the investor was actively involved in the company’s development. According to the broad definition, where none of the above requirements had to be met in order to qualify as a BA investment, the investment volume between 2002 and 2004 was estimated to total between SEK 3.5 billlion and SEK 4 billion, and the number of investments at 30 000. When applying the more narrow definition, the investment volume was about half of that figure, with only around 3 000 investments made over the same period (Tillväxtanalys, 2013).

A recent study from the Centre for Strategy and Evaluation Services for the European Commission distinguished three broad methodologies to collect data on angel investments, which are outlined below (CSES, 2012):

  • Supply-side approaches: This method uses supply-side data, such as surveys of known or likely angels, information collected by business angel networks and other groups of angel investors, and extrapolates this evidence to estimate overall business angel activities.

  • Demand-side approaches: This approach gauges business angel activities through the companies that were financed by angels. Business surveys, the Global Enterprise Monitor (GEM) database, company listings and equity issuance data all provide partial information about angel investments, which can then be used to identify unmeasured angel activities.

  • Third party/ institutional indicators: This mainly pertains to the use of tax information (in particular when there are widely used tax incentives for angel investors), co-investment schemes, and other government records to track angel investments.

Accurate estimates on business angel investments from demand-side sources require large samples of surveyed businesses, which are not available for most countries, especially not on a yearly basis. Moreover, demand-side information is not very comparable across countries due to differences in the methodology and breadth of business surveys. For these reasons and because data from tax information or other government sources are not systematically gathered for most OECD countries, the most reliable information comes from supply-side data.

This method, by its very nature, only captures investments made by participants of a business angel network (the so-called visible part of overall angel activities), and therefore excludes the activities of angels who do not belong to a formal network. Estimates about the invisible share of the overall business angel market vary greatly, as Table 2.4 shows for a few selected European countries. In Spain, for example, less than 5% of all angel investments are estimated to be visible, compared to more than 90% in Italy. Moreover, the reliability of these estimates is questionable, since they are gathered through different means from one country to the other and often outdated10 . This poses significant challenges for the estimation of the size of the overall angel market, where it is difficult to extrapolate evidence from the small portion of angel activities which are visible. In addition, this approach does not allow for any meaningful comparison of the overall angel market across countries.

Table 2.4. Estimate of the total number of business angels in selected EU countries (visible and invisible markets)


Total number of Business Angels (visible and invisible)

Share of visible Business Angels in total (%)


8 000






5 000 to 10 000

10 - 25


30 000






34 600 to 67 700

4 - 5


3 000 to 5 000


United Kingdom

25 000


Source: CSES (2012).

Despite this major shortcoming, data from the visible angel market could be considered as indicative of overall trends over time for a given country if the surveys are conducted on a regular basis, based on a common definition, and apply the same methodology for administering the questionnaire and data treatment.

Specific issues to harmonise the existing data on angel investments within networks include questions on how to avoid double counting (for example when angel investors are part of several angel networks), a common agreement on how to treat syndicated deals (as one deal or as several), a methodology of how to deal with missing survey data and non-responses (especially when the number of BANs which take part in questionnaires differs from one year to the other in a given country), and clarity concerning the exact sources, range and context of the available data.


Business angel investing can provide an important source of finance to bridge the equity gap in early-stage financing for some SMEs. Data suggests that angel investing benefits the investee companies and has important spill-over effects for the overall economy. Moreover, angel investing seems to be increasing, both in developed markets with a long-standing tradition of angel activities, as well as in many emerging economies, where angel investing is mostly still in its early stages. Policy makers increasingly recognise the importance of early stage financing for the development of their economies and have therefore introduced many initiatives to encourage angel activities, most often in the form of tax incentives, the establishment of co-investment funds, support to the organisation and professionalisation of business angel groups and networks, and investor-readiness programmes.

Evidence on angel investment suffers from a lack of reliable data. Most of the information available focuses on angel activities registered in a network, and is collected through surveys. A large but unknown part of the angel market operates outside of these networks, through activities which are not systematically registered and are therefore excluded from the analysis. In addition, the reliability and comprehensiveness of the information collected would benefit from improvements to the methodology for registering evidence, and for collecting and treating data on the visible angel market, which would in turn improve cross-country comparability.

This chapter illustrates a clear need to harmonise and expand data collection on business angel activities, if only for the activities taking place within networks, to enable evidence-based policy making. This would be a minimum prerequisite for including standardised data on business angel investing in Financing SMEs and Entrepreneurs: An OECD Scoreboard in the future. Even with potential improvements to the methodology, the incomplete nature of the data remains an important caveat in interpreting and analysing the available evidence.


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ANNEX 2.A1. The different stages of a business angel investment

A typical investment by a business angel or a member of a business angel group involves the following stages (OECD, 2011):

Deal Sourcing

The most commonly accepted sources of deal flow include business associates of the investor(s), professional sources such as attorneys, accountants and consultants, other business angels and early stage investors such as venture capitalists, previously funded entrepreneurs, and contacts from universities, business schools and research centres. Investors rely heavily on their personal network and pre-existing relationships for finding reliable investment opportunities. Although many networks accept business plans through their website, it is quite uncommon that these advance past the pre-screening stage and actually lead to an investment (Cohen, 2007).

Deal Screening

Applications are usually centralised and screened by a committee. Common selection criteria are the physical location of the venture, its sector and industry, its assessed growth potential, the reliability and experience of its management team, and the quality of its business plan (or the executive summary of it) (Cohen, 2007).

Initial feedback/coaching

The selected companies receive feedback and, possibly, guidance on how to proceed and present their company in line with potential investors’ expectations.

Company presentation to investors

Most angel groups organise monthly breakfast, lunch, or dinner meetings where a few selected companies can “pitch” their business model, followed by an opportunity to ask questions by prospective investors.

Due diligence

Due diligence can be defined as “the investigation and analysis the investor performs to see if an investment opportunity meets the investor’s criteria for funding. The primary objective of due diligence is to mitigate investment risk by gaining an understanding of a company and its business as well as determining the suitability of the investment for the portfolio” (Eyler, 2007).

Investment terms and negotiations

As angel investors partially take ownership of the company they invest in, the negotiation of the terms usually begins with the valuation of the company. The valuation of a company constitutes its price tag; the pre-money valuation represents the value of the business prior to the investment by the angel(s), and the post-money valuation incorporates the amount of investor funds raised. After the valuation has been negotiated, the equity ownership structure is discussed. Most commonly used ownership structures are common stock, preferred stock, participating preferred stock, and convertible notes. Other key aspects of the deal include the reduction of risk, amount of control, and provisions for liquidity. They are usually formulated with the help of a lawyer and stipulated in a standardised angel investor’s term sheet template (Koss, 2007).


Post-investment monitoring and support

Angel investors usually closely monitor the performance of “their” venture. This often includes a seat on the board of directors or another official role in the company, but can also be arranged in a more informal way. If several investors participate through a group or syndicate, they generally appoint a contact person who will serve as the main point of contact with the entrepreneur and who will provide financial updates and other information to the co-investors. Angel investors also typically provide connections, mentoring, advice, and other non-financial support to the company.


← 1. The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West bank under the terms of international law.

← 2. The study by Kerr et al. (2011) tracked the activities of two prominent angel investment groups in the United States (Tech Coast Angels and CommonAngels) during the 2001–06 period. A key result of their regression analysis is that ventures financed by angels are 20% to 25% more likely to survive for at least 4 years than enterprises with similar characteristics not financed by angels.

← 3. In both the United States and the United Kingdom, there was a noticeable shift towards venture investments in more mature companies between 2000 and 2007. This is attributed to an increased risk aversion since the collapse of the dotcom bubble, as well as the increased size of venture capital funds over that period, which has driven up deal sizes and hence investments in more established enterprises (Anderson and Moore, 2007 and Pierrakis and Mason, 2008). The financial crisis led to a further decline in early stage venture capital activities in most developed countries between 2007 and 2014 (OECD, 2015a).

← 4. CORFO support for the angel network Mujeres Empresarias finished in late 2015.

← 5. This means that ventures that are financed by angel investors are inherently different from ventures that are not, in ways which are hard to observe by researchers, such as the ambition or ability of their management team. If this is the case, any difference in their performance between funded and unfunded ventures may be attributed to these differences rather than the direct effect of the involvement of angels.

← 6. In the United States, for an individual to be considered an accredited investor, they must have a net worth of at least USD 1 million, not including the value of their primary residence or have income of at least USD 200 000 each year for the last two years (or USD 300 000 together with their spouse if married), and have the expectation to make the same amount this year. The definition in Canada is very similar.

← 7. In Canada, five provinces and one territory offer angel tax incentives (Carpentier and Suret, 2013).

← 8. Note that this list is not comprehensive and only lists the different schemes that exist in every country, rather than the different public-private investment funds that make use of this scheme. In the Netherlands, for example, there are 19 investment funds (mostly sector-specific) that make use of the SEED capital scheme, the successor to the TechnoPartner programme. Moreover, the European Investment Fund (EIF) is about to expand its successful European Angels Fund (EAF), which was launched in Germany and later expanded to Austria and Spain, to other European countries and/or regions. This fund provides equity to business angels (and other non-institutional investors) for the financing of innovative companies in the form of co-investments.

← 9. In addition to national governments, supranational federations such as the ACA (Angel Capital Association) in North-America, BAE and EBAN for European countries and BANSEA (Business Angel Network South-East Asia) can also play an important role in promoting, professionalising and supporting national associations and federations.

← 10. The estimate for the United Kingdom comes from a study published in 2000. Data from the Netherlands and Poland come from interviews with experts, often representatives from business angel networks.