Angel investing: an examination of the evolution of the Finnish market

Since the study by Lumme, Mason and Suomi (1998) (Lumme, A., C.M. Mason, and M. Suomi. 1998. Informal venture capital: Investors, investments and policy in Finland. Boston: Kluwer Academic Publishers) more than a decade ago there has been very limited research on Finnish business angels (BAs). Thus, the primary aim of this study is to provide a more up-to-date picture of angel investing in Finland, reflecting market conditions in year 2006. The results are compared to Lumme, Mason and Suomi (1998) who portray the Finnish BA market in year 1994. In order to understand how the market has evolved over the years, the results are analysed with respect to changes in general economic conditions, the stock market development, the financial system, the entrepreneurial landscape and the marketplace for BAs. The current study draws upon interviews with 53 Finnish BAs. The results suggest that Finnish BAs have reduced their exposure to risk by increasing their prevalence to syndicate investments, investing in more mature ventures, holding more negligible shares of ownership, being more strict in their screening and placing more focus on due diligence. However, their involvement in the operations of the companies they fund has declined over the years. The analysis indicates that the change in the marketplace with the greatest impact on market development has been the establishment of a business introductory service. It has increased transparency in the market, and enables the formation of investment syndicates and transferral of investment practices. Based on the results implications are provided for BAs, entrepreneurs and policy-makers.