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Angel Financing & High-Growth Firms

Mark Marich

An OECD report printed earlier this year examines why angel investment continues to be relatively overlooked despite the fact it is the primary source of outside equity financing and support for startups in a number of countries. Financing High-Growth Firms: The Role of Angel Investors points to a couple of underlying reasons for the general lack of understanding: angels prefer to keep details about their investments private, making accurate data collection difficult; and fuzzy definitions and labels used to differentiate true angel investment from other types of early stage funding.

Based on more than 100 interviews with investors, entrepreneurs and others in 32 countries, the book points to a persistent and growing gap between angel investing and venture capital that was exacerbated by the global financial crisis.

So which countries have been successful at promoting angel investment through public policy and what did they do?

The Australian government reduced regulatory barriers that were holding back investment. The ‘Angel Law’ in Israel allows investment deductibility in support of private high-tech companies. Japan has had tax incentives in place to promote angel investing since 1997. In the United Kingdom, a new GBP 50 million co-investment fund will invest alongside business angel networks.

The report’s author, Karen Wilson, a consultant for the OECD Directorate for Science, Technology and Industry, argues that whatever the approach, governments would be wise to foster the growth of their angel networks.

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