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A Literature Review and Industry Analysis of Informal Investment in Canada: A Research Agenda on Angels

5. Summation

Angels are particularly well-suited to close the equity gap because they invest in smaller tranches and tend to invest at the seed and start-up phases of growth – stages that institutional and formal venture capitalists rarely consider. Geographically, angels are widely dispersed and experience-wise, they can provide value to the new firm.

It is easier, though not desirable, to investigate only large and sophisticated angels. Conducting research highlighting the activities of only extremely wealthy individuals who make spectacular investments which produce incredible returns is glamorous and is the ingredients of great hero stories. Its usefulness, however, is limited.

There are very good reasons to know more about the smaller, less sophisticated angels as they contribute capital to sectors where entrepreneurs have few other substitutes. "Institutional venture capitalists tend to finance the small number of young companies that can productively deploy large amounts of capital with the potential to produce major businesses. Angels ... tend to be the primary sources of money for the vast majority of corporate innovators in this country (the US), many of whom will be very productive, but will remain small businesse" (Pavey 1995).

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