The report stated that Governors are increasingly interested in entrepreneurship because of its key role in driving business innovation. While entrepreneurs face several common challenges, including developing business acumen and making connections with experts and mentors, often their greatest challenge is raising capital. Entrepreneurs’ emerging technologies are frequently viewed as too risky for banks, private equity firms and venture capitalists and yet many fledgling companies require more investment to grow than can be raised from friends and family. Angel investors are increasingly stepping in to fill this gap.
Angel investors are wealthy individuals with business or technology backgrounds who provide entrepreneurs with capital, connections, and guidance. They provide early-stage financing in a space once occupied by venture capitalists, who now invest primarily in larger deals and more mature companies. Angels invest in local and regional ventures, primarily in high-technology sectors, giving their investments local impact. In the past decade, many angel investors have formed and joined groups because investing through groups offers several advantages, most notably a large and more diverse portfolio, access to expertise, and higher deal flow.
States increasingly recognize the value of angel investments and are adopting policies to promote them. Some have created statewide networks to assist the formation of angel groups, link angel groups to share best practices, and help groups invest together in companies that need more funding than a single group can offer.
Governors have several options to encourage the formation of angel groups to expand early-stage investment:
• Promote seminars on private equity investment for current and potential angel investors;
• Assist entrepreneurs by connecting them with existing entrepreneurship education and services;
• Facilitate the formation of statewide angel groups to organize and empower local leadership and build investor knowledge;
• Ensure that angel investors are well-represented on state economic development advisory boards, along with entrepreneurs, universities, and other industry representatives; and
• Identify and collect metrics to monitor the impact on policies to encourage angel investment.
Clayton White.
