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David Lingelbach

Definitional concerns are an issue when researching business angels in sub-Saharan Africa. In the chapter the author focuses on this subject in his review of our knowledge of business angels in sub-Saharan Africa. He emphasizes the need to consider the institutional context and the heterogeneity between countries as well as the differences from Western countries. He argues that the recent increase in gross domestic product growth in several African economies, combined with a slow reduction in the level of violence, has contributed to an increase in entrepreneurial activity and, as a consequence, we can expect an increase in business angel investments. However, these activities will not mimic the behavior of BAs in developed economies, but will evolve a practice that is suited to local conditions. National levels of business angel investing activity are likely to continue to vary, influenced by formal and informal institutions.

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Gianni Romaní and Miguel Atienza

The chapter discusses the emergent business angel markets in Latin America – comprising a heterogeneous group of countries, the largest of which are Argentina, Brazil, Chile, Colombia and Mexico. These countries are increasingly aware of the importance of entrepreneurship as engines of economic development. Most Latin American governments are fostering a series of policies to encourage entrepreneurship and innovation, including the creation of business angel networks (BANs). At the same time, wealthy individuals are starting to invest in entrepreneurial ventures. However, the authors show that the business angel markets in Latin America are still incipient, and its development is influenced by the experience of successful companies in the United States such as Amazon and Google, which were initially funded by business angel investors. In some Latin American countries, the progress of the business angel market has had significant support from public policies and multilateral organizations. Changes in the institutional frameworks during the last decade have contributed to greater political and economic stability. Nevertheless, the region has not yet a critical mass of business angels. There are several remaining obstacles for the progress of the business angel markets. For example, cultural issues, such as a lack of trust, make the relationship between entrepreneurs and business angels insecure. A lack of long-term vision and a risk aversion among Latin American investors and institutional obstacles such as a lack of clarity in defining the rules of the game represent further barriers.

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Cécile Carpentier and Jean-Marc Suret

Worldwide, governments have implemented numerous initiatives to promote business angel (BA) investment activity. However, assessments of these initiatives produce mixed results, hence discussion about their effectiveness continues to be debated. A popular approach to increase BA investment activity involves changing their risk-return ratio through the introduction of various kinds of tax incentives. The most common form of tax incentive is a front-end tax relief that has the effect of reducing the real cost of the investment. The chapter reviews and compares the evidence on the effectiveness of different tax programs around the world. This reveals that there is very limited evidence that tax incentives for BAs are effective, with tax expenditures generally being higher than the tax revenues that are generated by the investments. The authors attribute the failure of the programs to their poor design. However, it needs to be acknowledged that there are inconsistencies in the results of the assessments of the programs. These may be attributable to the choice of hypotheses and methods in the assessments. Hence, there is a need for further research on the effectiveness of tax initiatives for BAs.

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Tom Lahti and Henrik Keinonen

The chapter focuses on an initiative that has become popular among policy-makers around the world in order to foster business angel activities, namely, business angel networks (BANs). BANs have been established to increase the transparency and improve the efficiency of the business angel market by providing a channel of communication that enables entrepreneurs seeking finance to come into contact with business angels, and at the same time enable business angels to receive information on investment opportunities without the need to compromise their anonymity if so desired. The authors describe the development of BAN activities in different countries and evaluate their benefits and drawbacks. The chapter identifies different kinds of BANs and the different ways that BANs can provide their deal-brokering service and deliver supplementary functions such as training of entrepreneurs and business angels, advisory service, contract templates and the development of good practice. Evaluations of BANs have shown both positive impacts on investment activity as well as negative effects, hence there is no conclusive answer to whether there is a need for public sector interventions to support the establishment and operation of BANs.

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Lars Hornuf and Armin Schwienbacher

The chapter reviews knowledge of crowdinvesting (or equity crowdfunding). Crowdfunding has emerged over the past decade as a new and promising means of financing new ventures. Crowdfunding includes a broad range of activities, such as donations, pre-purchase and other reward-based forms of funding by the crowd as well as debt and equity financing. The authors focus on a sub-category of crowdfunding that can be defined as ‘crowdinvesting’ – Internet-based investment in new ventures by the crowd with the intention to obtain some residual claim on future cash flow of a venture. As a new development in the market it raises questions regarding the boundaries between crowdinvestors and business angels. The aims of the chapter are to describe the function of crowdinvesting and to analyze the similarities and differences between crowdinvesting and angel investing. The authors argue that in many cases, crowdinvestors are likely to complement rather than substitute business angels and venture capital funds.

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Edited by Hans Landström and Colin Mason

This book synthesizes 30 years of research on business angels by charting the significant role they play in the financing of entrepreneurial businesses in both developed and emerging economies. The expert group of contributors examine business angels themselves, the evolution of the market and the role of public policy in influencing angel investment. Finally, the editors provide an agenda for future research on business angels.
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Edited by Hans Landström

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Hans Landström

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Harry J. Sapienza and Jaume Villanueva