Should government support business angel networks? The tale of Danish business angels network

Policies promoting informal venture capital generally and BANs in particular have gained increased attention in recent years. As a consequence, Business Angel Networks (BANs) are now widespread across Europe. However, there continues to be a debate whether BANs should be supported with public money. This paper discusses the possible rationale for governments to support BANs and what criteria to apply when evaluating such networks. The paper is based on an in-depth observation study of the whole life cycle of a national BAN – the Danish Business Angel Network – and a comparison with a similar national angel network in Wales. Results show that applying traditional evaluation criteria for assessing BANs may provide only a partial picture. DBAN was squeezed in between political pressures, impatience and lack of understanding of the broader benefits of an angel network. It was therefore left to die. This contrasts with Wales where more patience and persistence was shown and it was rapidly integrated into the investment community. The implication is that lack of consistent funding, even in downswings, may erase the position and awareness of BANs in the capital markets. When governments consider whether to provide continuing support to BANs they should evaluate not only their immediate effectiveness but also whether BANs should be considered a part of the general small business support infrastructure.