Anyone who believes that business angels are the panacea to funding entrepreneurial start-ups is living in cloud cuckoo land.
The word ‘angel’ is a breach of the Trades Description Act. Most are gin soaked readers of the ‘Daily Telegraph’’, personally wealthy and arrogant, looking for some poor cash starved business person who will worship at their cash pile altar.
The use of the term ‘business’ is also misplaced. Many so called ‘angels’ are recipients of corporate pensions and who have cashed in on their share options.
There are two main characteristics of, to use a phrase, business angels:
- They talk a lot.
- They rarely write out cheques.
These personal views have been unexpectedly supported by Anca Enica of Imperial College, London. In her survey of start-up funding she says that:
- business angel networks fail to deliver value for money
- their response to proposals made to them is often substandard
- entrepreneurs become frustrated and are often left isolated from potential investors
- business owners are not correctly vetted and come for investment at too early a stage in their business life
- some business angels have hidden agendas, perhaps hoping to sell their own services.
Whilst being reluctant to propose further regulation it is a concern that there are a number of unauthorised advisers in this market space who are not fit and proper for their work.
At the heart of the problem is the lack of economic advice for early stage businesses. Enterprise Britain has examined this issue on many occasions and always comes to the same conclusion.
It requires government subsidy to underwrite advice (solicitors, accountants, corporate finance houses) at a price that the businesses can afford.
There is no chance of this ever happening.