How to incentivize the emergence of new business angels: the Italian case

Entrepreneurs play a critical role in developing innovative solutions to boost a collective progress. Their ability to develop these innovations into market ready products requires to access appropriate financing. Angel investors play a critical role in financing the start of the entrepreneurial pipeline. They are high net worth individuals—typically former entrepreneurs who have grown and sold one or more successful businesses, senior corporate managers, and business professionals—who invest their own money directly in new and early-stage unquoted businesses and make their expertise and networks available to support the entrepreneurs that they support (Mason and Botelho, 2018). The crucial role that BAs play throughout the world in financing entrepreneurial businesses means that they should be a major focus for entrepreneurship researchers. The challenge in BA research, especially in comparison to venture capital and other parts of the entrepreneurial finance market, is the lack of databases that enable sophisticated statistical analysis. Facing such phenomenon, our mapping work of the Italian BA ecosystem is a key step for achieving a more comprehensive and fruitful analysis, entering in the research framework to deal with the above-mentioned information gap. The importance of informal venture capital is that it minimizes the first funding gap, also called the seed gap, which is between the financing from the 3Fs (founders, friends, and family) and the venture capital funds, which do not tend to invest small amounts due to their high transaction costs (Mason and Harrison 1999). A better understanding of the BAs ecosystem, and their willingness to invest in innovative project, makes a key contribution to the development of policies to mobilize private capital to address overall collective objectives. We need to understand better how to create an environment that nurtures and supports the development of rapid growth ventures, particularly in rapidly changing knowledge-based economies. The core of the following thesis work is on the policy perspective in dealing with BA support. Using public sector finance to support business angels, either directly or through guarantees, is a fairly recent development. Most of the measures developed by public authorities are based on the imitation of policy options in the formal market, without an in-depth ex-ante evaluation. Further research is needed to judge the efficiency of such measures and to determine how this support for business angels fits into the overall landscape of public financial support measures for new companies (Aernoudt et al., 2007).