Executive forum: Public support for the business angel market in Europe – a critical review

Abstract

Various levels of government have implemented instruments to promote business angel investment, often mirroring those used to support the institutional venture capital market. The paper reviews the existing practices at a point in time when intervention in the field of business angels is becoming increasingly popular in Europe. Governments are looking for innovative ways to enhance business angel investments and the evolution of the policy in the field is rather trial and error based. We see a shift from classical support to network creation and improvement of the fiscal environment, towards guarantee schemes for angel investments and co-investment schemes. This latest, most recent, approach is analysed by a detailed case study of the Belgian Business Angels Plus (BA+) scheme, which matches the financing provided by a business angel investor and the entrepreneur. In its initial two and a half years of operation the BA+ scheme has received close to 70 applications, of which just over 20 have been rejected. The characteristics of the deals financed by BA+ applicants are similar to those found in the average investment in Belgium. Following up the companies applying for the BA+ loan shows that the programme has so far avoided incurring significant losses. However, it is not possible to determine if lack of finance was one of the reasons for the bankruptcy of the companies that did not secure the additional loan.

Key words:

• Co-investment schemes
• guaranteeing schemes
• secondary due diligence

Acknowledgements

We would like to acknowledge the generous assistance given by Wilfried Wermarien, the manager of the BA+ facility at the Fonds de Participation and Colin Mason for his comments on an earlier draft.