Business angels in a changing economy: The case of Sweden

Abstract

The Swedish business angel market of 2004 is presented and compared to that of 1992 in order to determine the significance of the time factor. The presentation is carried out against the background of the macroeconomic changes that have taken place and how they have affected the informal venture capital market. The empirical findings reveal how the amounts invested have changed, which companies the business angels have invested in and the ways in which the business angels' deal flow has changed since 1992. The results show that business angels in Sweden have become more professional in their way of identifying new investment opportunities and that the informal venture capital market is becoming more mature with less information asymmetry. Furthermore, the results demonstrate that Internet hype and changes in the Swedish taxation system have probably influenced the business angel market, making investors invest at earlier stages and in high-tech companies.

Key Words:

• Economy
• business angels
• investments
• deal flow
• taxation

Acknowledgements

The present research project was made possible by, and financed through, the Swedish Agency for Economic and Regional Growth (Nutek) and the Swedish Foundation for Small-Business Research (FSF). Furthermore, Gate2Growth has, through a researcher exchange programme, made it possible to rewrite this paper at the University of Edinburgh, which has been of great value. An earlier version of this paper was presented at the EDGE 2005 Conference, Singapore Management University.

Notes

1 The values for 2004 have been calculated from investments during the last five years.

2 All monetary values from 1992 have been adjusted to take account of inflation.