Business angels are individual investors, usually with business experience, who provide capital for start-up firms. They are an important source of equity for small firms with growth potential in their early stages of development, long before they become attractive for venture capital funds.
Business angels are usually interested in firms with potential for rapid growth operating in fields where they have experience, and usually prefer firms located fairly close to their home or office.
The tools to activate business angel investment are the responsibility of the Member States, who should create incentives for private investors that are willing to invest in enterprises, including by using public funds to target co-investment with business angels.
Increasingly, business angels are getting together in networks, private or semi-public organisations which help match up entrepreneurs and potential investors. Most networks operate at regional or national level. The European Business Angel Network (EBAN) represents the European business angel market and networks.
The Commission's policy is to identify and spread good practices that can help improve the conditions for business angel investment.
The Competitiveness and Innovation framework Programme (CIP) allows business angels to develop co-investment funds in partnership with venture capital funds. The funds should focus on seed and start-up financing, and the venture capital fund should act as lead partner.
Evaluation of EU Member States’ Business Angel Markets and Policies
In 2012 the European Commission finished a study on the characteristics of the Business Angels market and EU Member States’ best practices of policies and programmes supporting Business Angels financing:
More on early-stage finance
- EASY (early-stage investors for high-growth businesses) is a meeting point for early-stage investors and innovative businesses seeking risk capital from across Europe.
- Gate2Growth is a pan-European business platform for entrepreneurs seeking financing, investors, incubator managers, knowledge transfer offices, and academics. It provides various tools to help to access finance.
- Benchmarking business angels (2002): this expert group report looked at public policy issues and good practices concerning financing by business angels.
Many entrepreneurs need guidance on the advantages and disadvantages of alternative forms of finance and on how best to present their investment projects to potential financiers. Investment readiness programmes similarly need to build on European best practice.
To this end the Commission in 2009-10 will identify and disseminate good practices that can help in developing high quality investment readiness programmes.
More on investment readiness
- Ready for Equity! project: The first phase of this project (2006-08), funded by the Commission's Leonardo da Vinci programme, identified key obstacles to business angel activity across the European business community. The project developed and tested training curricula for business angels and entrepreneurs. A second phase of this project has been approved and will run until September 2010 to facilitate the rollout of training both for angels and entrepreneurs.
- Investment readiness (2007): A workshop report on good practices in investment readiness training.