Imperial College London, who surveyed entrepreneurs seeking funding for start-up businesses and angel members of a variety of networks, found that most networks were “substandard” at connecting entrepreneurs and investors after presentation events.
Groups which filter investment opportunities for their members were frustrating potential angel investors with poor quality business propositions, while start-ups complain that too few members are willing or able to invest, the research found.
“This lack of co-ordination left frustrated entrepreneurs searching for investors through other networks,” said Anca Enica, who eased up the research, although “most networks failed at this process and this was seen as a major flaw in their intermediary role”.
Angels also reported that businesses are coming to angel networks too soon due to an inability to raise “seed” early stage finance from their own funds or friends and family for example.
Many entrepreneurs also responded by saying that too many network angels are not ready to invest, while many professionals only attend events to either sell their services or socialise, with both entrepreneurs and investors also suggesting that “most” of the networks are run by managers “who are not qualified to effectively filter through business plans”.
Fees were another sore point – start-ups considered presentation charges “onerous”, while none of the angels who were interviewed thought they should be part of a network’s business model.
Instead, most angels said they would be willing to pay a higher membership fee in return for higher quality proposals from companies, Enica said.
Jenny Tooth, of the British Business Angels Association, which represents 24 networks, said: “I’m very surprised by these reflections. There’s a huge amount of business and investment experience available in networks which shouldn’t be ignored by entrepreneurs.
“Networks spend a lot of time looking at business plans and selecting the most suitable ones for angel investing. Networks also give an awful lot of advice on choosing [investors] who are suitable.”
Entrepreneurs also suggested more network meetings should have a sector focus so start-ups meet more investors with relevant industry experience, although Ms Tooth said there are already angel networks that cater for certain sectors and added that her organisation had never received a complaint about an Angel Investment company.