Business Angels lend a helping hand
With an average age of 51 years, 19 years of managerial experience, 14 years as an entrepreneur – and, certainly, considerable financial resources – Business Angels are private individuals who invest in young companies that are not quoted on the Stock Exchange. As very young companies (or those that need only a small amount of funding) often find it difficult to attract venture capital, the BANs bring these companies in contact with BAs who help provide the necessary funds.
In general, the 500 or so Business Angels who are active in Flanders know each other, because they exchange professional information via so-called BANs (Business Angel Networks). As very young companies (or those that need only a small amount of funding) often find it difficult to attract venture capital, the BANs bring these companies in contact with BAs who help provide the necessary funds. But their investments are not purely angelic: Business Angels are highly talented business people investing in promising businesses to reap handsome returns.
Flemish BA Ignace De Bock, who has founded 7 companies, sums up the concept succinctly: “We are dyed-in-the-wool managers, who know what coaching is and how we can boost performance. Our knowledge, our capital, and our insights are of enormous value to companies in the start-up phase. I’m no longer attracted by mammoth enterprises – give me the power of small, flexible, strong growth-potential organisations: they’re agile and they want to prove themselves.”
What Makes Companies Go Bust
In a study commissioned by the Flemish government, Vlerick Professor Sophie Manigart and her Ghent University colleagues Veroniek Collewaert and Lotte Goossens have researched the Flanders Business Angel Network. Their study – summarised in “Final report of the research project: An evaluation of the effectiveness of government subsidies to Business Angel Networks” – concludes that BAs are most advantageous for, and interested in, local companies in the service sector or distributors of consumer goods.
The study interviewed 34 Business Angels who made investments via a BAN between 1999 and 2003. In addition, 28 entrepreneurs – who received their funding via a Flemish BAN during the same period – were also interviewed, and their company’s annual statement of accounts was examined as well.
The interviews indicate that most of the invested amounts would not have been invested without the existence of the BANs. Furthermore, the study shows that companies that receive Business Angel financing contribute positively to their region’s economic development. Each BAN-supported company created an average of 1.84 extra jobs starting from the year that the Business Angel provided funding.
The study provides a number of other insights into the effectiveness of Business Angels and BANs and the role played by government subsidies. The study also reveals that Business Angels with less experience need training to be most effective. To answer this need, Vlerick offers training and coaching programmes for Business Angels to help them tackle these kinds of investment projects with the benefit of best practices.
Collewaert V. Manigart S. Aernoudt R. 2010. An assessment of government funding of business angel networks in Flanders. Regional Studies. 44 (1): 119 -130.