Research Reveals Major Impacts Of Angels — And Some Angel Groups Outperform VCs

Angel investing is not just about funding startups. It’s about experienced entrepreneurs providing hands-on assistance and expert advice to help new companies grow. This combination can lead to financial and other personal rewards. Readers have seen me repeat this, but now there’s academic data to prove just how much value angels can add.

Josh Lerner of Harvard Business School and Antoinette Schoar of the MIT Sloan School of Management are two of the foremost scholars on finance and entrepreneurship. In recent years, the two have teamed up for a series of studies on what they call the “neglected segment of entrepreneurial finance”—angel investing.

How are angel investors neglected? In their report released todayby the think tank Third Way, Lerner and Schoar write that venture capital has vastly overshadowed angel investors in the realms of academic research, policy initiatives, and popular discussion. Partly, that’s because VC has been so successful: in 2014, 63% of market capitalization in the U.S. consisted of VC-backed public companies. But the total size of the American angel investment market has been the same size as the VC market for the last decade (until the recent focus on large VC investments in unicorns). Last year angels invested an estimated $24.6 billion into 71,000 companies. Read more…