Chapter 1: Business Angels
Colin M. Mason INTRODUCTION Business angels are conventionally defined as high net worth individuals who invest their own money, along with their time and expertise, directly in unquoted companies in which they have no family connection, in the hope of financial gain. The term angel was coined by Broadway insiders in the early 1900s to describe wealthy theatre-goers who made high-risk investments in theatrical productions. Angels invested in these shows primarily for the privilege of rubbing shoulders with the theatre personalities that they admired. The term business angel was given to those individuals who perform essentially the same function in a business context (Benjamin and Margulis, 2000: 5). There is a long tradition of angel investing in businesses (Sohl, 2003). Moreover, angel investing is now an international phenomenon, found in all developed economies and now diffusing to emerging economies such as China (Lui Tingchi and Chen Po Chang, 2007). However, it has only attracted the attention of researchers since the 1980s. Several aspects of this definition need to be highlighted in order to emphasize the distinctiveness of business angels as a type of investor. High Net Worth Having wealth is a prerequisite for becoming a business angel. Business angels invest upwards of £10 000 per deal (sometimes in excess of £100 000) and typically have a portfolio of two to five investments (some angels have more). However, they are not investing their entire savings in this way. Because of the high risk of investing in unquoted companies, most angels allocate...
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