Research reveals that American Angels are also the unsung heroes
Writing for Forbes, Marianne Hudson, Angelinvestor and Executive Director of the Angel Capital Association, reviewsnew academic research report ‘Rise of the Angel Investor: A Challenge to Public Policy’.
Angel investing is not just about funding startups. It’s about experienced entrepreneurs providing hands-on assistance and expert advice to help new companies grow.This combination can lead to financial and other personal rewards. Readers have seen me repeat this, but now there’s academic data to prove just how much value angels can add.
Josh Lerner of Harvard Business SchoolandAntoinette Schoar of the MIT Sloan School of Managementare two of the foremost scholars on finance and entrepreneurship. In recent years, the two have teamed up for a series of studies on what they call the “neglected segment of entrepreneurial finance”‚Äîangel investing.
How are angel investors neglected? In theirreportreleased by the think tank Third Way, Lerner and Schoar write that venture capital has vastly overshadowed angel investors in the realms of academic research, policy initiatives, and popular discussion. Partly, that’s because VC has been so successful: in 2014, 63% of market capitalization in the U.S. consisted of VC-backed public companies. But the total size of the American angel investment market has been the same size as the VC market for the last decade (until the recent focus on large VC investments in unicorns). Last year angels invested an estimated $24.6 billion into 71,000 companies.
So why is angel investing so neglected? Data on angel investors, it turns out, is very hard to come by. Most angel investments are made on an individual basis, so they’re not subject to regulatory disclosures. And few have studied the characteristics of individual angels – although the new “The American Angel” study is working on that – angels please take the 10-minute survey. Plus, the records of companies applying for angel funding are typically kept confidential.
After years of persistent digging and number-crunching, Lerner and Schoar have opened a window into the inner workings of angel investor groups. And the information pouring out shows exactly why angels deserve more recognition.
Read the full article inForbes here.