Promoting Informal Venture Capital: II. Co-Investing, Syndication and Indirect Investment Models

Abstract

The creation of a business introduction service removes a major barrier to the more efficient operation of the informal venture capital market by improving the flow of information between companies seeking finance and business angels. However, many investors also have other constraints on their ability to invest, including limits on the amount of finance that they have available for investing in unquoted SMEs, limitations on their expertise, the costs (monetary, and, in particular, time) of appraisal, monitoring and involvement, and uncertainty of exit routes. These can be addressed by other initiatives which encourage co-investment with venture capital funds, syndication between business angels and the pooling of investment funds. This chapter is concerned with these approaches.