The Future of Angel Investment Industry: The Case of Government as Angel Investor
1. Introduction
Venture Capital investments are critical in the development of small and innovative companies by allowing them to firstly survive and then prosper (Phillips and Zhdanov, 2017). As such, VC is an important funding source for entrepreneurial activity. Note that Venture Capital and Venture Capitalists are used interchangeably in this paper. The quantity of funding has progressively grown over the past decade from approximately USD60 Billion in 2012 to a little over USD300 Billion in 2020 (Crunchbase, 2021). The majority of this funding has originated in the Americas (North and South), constituting approximately 50% of the total funding. The remainder is equally split between Europe and the Asia Pacific regions. Angel investing, a sub-group of the overall VC market, is significantly smaller and generally provides funds to start-ups that have no revenue. Angel investors and VC firms operate in similar ways in that they usually adopt a very hands-on role in the deals which they invest and provide entrepreneurs with advice and contacts (Kerr et al., 2014).
Figure 1 shows the size of VC funding, broken into the stage of investment and demonstrations a gradual increase in the dollar value of deals. The number of VC financing deals peaked in 2015 and have gradually declined over the past few years, to stabilise around 8,000 (Statista, 2021).
This paper describes the contribution of VCs in growing an economy through spurring innovation and facilitating individual company growth creation. Apart from the size of investment, Angel Investors and VCs have very similar investment strategies as highlighted by Kerr et al. (2014). Thus, in this paper VC and angel deals are not differentiated except for the latter part of the paper where specific mention is made to angels.
