How and where will funding come from for young entrepreneurs in the G20?
Across every G20 country a crucial factor that will determine the success of entrepreneurship is access to finance. Without the ability to secure funding, entrepreneurial companies will be unable to reach their growth potential and may not survive at all.
Funding the future: access to finance for young entrepreneurs in the G20 analyzes the opportunities and issues around funding.
We’ve pulled from that comprehensive report just one nugget on the topic of angel investors and their importance to the life-cycle of entrepreneurship. The full report is available for download.
Angel investors: filling the start-up gap
Recent years have seen a shift in the characteristics of early-stage investment. Formal VC firms have become less active in funding start-ups and are channeling their investments towards later-stage ventures, where the risks are lower and the returns more certain.
As this gap has widened, angel investors have stepped in, although only in some G20 countries that already have strong equity cultures.
Angels spread their wings
A recent report from the OECD found that, in the UK and US, angel investment has been consistently larger than early-stage VC investment over the past 10 years. And in our survey of entrepreneurs, business angels are the only category where respondents have seen a more or less steady improvement in the past five years.
Although business angels have been established in developed markets, including the US, UK and Canada, for the longest period, they are also starting to become more active in rapid-growth markets. In China, Turkey and Russia, almost two-thirds of respondents say that the environment for business angels has improved, and more than half hold a similar view in Indonesia.
Some G20 countries have started to see the emergence of "super angels" — ultra-high–net-worth individuals who create a highly formalized and professional infrastructure to facilitate serial investments in entrepreneurial companies. The lines between super angels and VC funds are somewhat blurred, however.
- Entrepreneurs should tap into business angel networks and explore options for managing working capital, such as invoice finance.
- Government's role is to facilitate the formation of business angel networks and support them through tax policy, to channel corporate cash mountains by encouraging corporate venturing and to offer tax breaks on corporate investment in new ventures.