Informal Venture Capital: Investors, Investments and Policy Issues in Finland

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Small businesses in virtually all industrialized countries find it increasingly difficult to obtain finance from institutional sources. Banks have become more risk-averse; venture capital funds, previously of only marginal significance, are now often concentrating their investments on established companies; and management buy-outs and buy-ins and pressures to reduce government spending have resulted in a reduction in public policy initiatives. In this context there is a growing interest in the role of the informal venture capital market as an alternative source of risk finance for small businesses. This text investigates the phenomenon of business angels - wealthy private individuals who invest in small businesses - who are increasingly recognized throughout the developed world as representing an important source of venture capital for entrepreneurial businesses in their start-up and early growth stages. This volume answers questions about these investors, and contributes new evidence on aspects of the informal venture capital market. It further provides an assessment of the effectiveness of policy initiatives to stimulate the supply of informal venture capital, based on experiences in Finland.