The Scale, Growth and Returns of Informal Venture Capitalists’ Investments in Italy

Start-ups need capital to make new investments, but they don't have access to debt capital because of their inability to produce positive cash flows. The economic player who best suits seeds and start-ups financial needs is the Business Angel, a private investor who finance newly constituted firms with his own savings, filling the equity gap. Given the Italian economic structure based on SMEs, the presence of Business Angels is very important. This study is the first attempt to present a wide picture of the Italian informal venture capital market, and analyzes data on Italian transactions and personal features of Italian Business Angels gathered during 2007, 2008, 2009 and 2010 with the support of IBAN (Italian Business Angels Network). Our analysis shows that the Italian informal venture capital market grew significantly in the last decade (CAGR 2000-2010: 56%) and the number of operations is rising despite economic stagnation. Moreover, Italian Business Angels features are converging to those of Angels of more developed markets in terms of education, amount invested, number of yearly operations, exit strategy, etc. Furthermore, a regressive analysis on determinants of business angels returns has been performed, which shows that the exit strategy and the industry financed have a significant impact on the IRR of angels' investments