The operation of the informal venture capital market in Scotland

This paper addresses the lack of knowledge about business angels based in Scotland. An understanding of the informal investment market is important given that Scotland has recently achieved devolved powers and business start-ups are a priority of the Scottish Executive. Based upon 140 replies to a survey questionnaire, investment-active angels are profiled in terms of business background and experience, motivation and investing criteria, behaviour and outcomes. Of particular note is the finding that the majority of angels based in Scotland lack experience of small businesses and it is argued that this cannot be helpful in securing deals with entrepreneurs. The paper addresses how entrepreneurs can target angels, the lack of 'investable' entrepreneurs, the role of experienced angels, how nascent angels can be encouraged to make their first investment, tax breaks and the search behaviour of angels. Finally, a typology of angels, based on the number of investments made by an individual, is set out.