A MAJOR new study from Oxford University's Said Business School has found that business angels are between 30 and 40 times more likely to fund the process of turning ideas into money than are venture capitalists, writes Chris Koenig.

The survey by Dr Mark van Osnabrugge is the first of its kind to directly compare the activities, and likes and dislikes, of business angels and venture capitalists.

Business angels are typically wealthy individuals who invest their own money in start-up and incubator-stage businesses and then use their varied experience to help the firms grow.

Venture capitalists are professional investors who invest on behalf of their fund providers.

Both types of backer are vitally important to a nation's entrepreneurial climate having fostered such household names as Microsoft, The Body Shop, The New Covent Garden Soup Company, and Vodafone to name but a few.

Venture capitalists are often not able to back smaller concerns as obligations to fund providers impose time and management constraints. But when they do invest they back firms that are on average eleven times larger than those backed by angels. They also produce 17 times as much money as the average business angel for each venture.

The study found that angels tend to follow "gut feeling" rather than follow "due dilligence" procedures when investing in high-risk new ideas.

Since the mid-1980s angels have produced about £5bn companies compared with £1.3bn from venture capitalists.

The report was part-funded by Venture Capital Report, based in Oxford, Britain's oldest "marriage agency" designed to bring investors and entrepreneurs together.

Dr van Osnabrugge has also published a summary of findings that is packed with tips for people with business ideas, investors, academics, and policy makers.

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