Only 10 percent of the projects presented to business angels get financed. That's according to a recent study of more than 20 active networks of private investors in Latin America and the Caribbean, conducted by IESE Prof. Juan Roure, Amparo de San José and Juan Luis Segurado.
Despite this low rate, new business projects increasingly depend on these business angels, due to the current credit restrictions.
As such, it is essential to identify the strengths and weaknesses of these networks, in order to promote their development and boost the economy.
Inexperienced Investors
Business angels have emerged as the best partners for spurring the growth of dynamic companies and creating jobs, by providing "smart capital" in segments that are not mature enough to attract traditional venture capital.
The sad fact is, budding companies are often excluded from traditional bank financing owing to the risks and lack of guarantees or security.
Latin America and the Caribbean, where angel investment is still in its infancy, would benefit from a higher level of professionalism.
Leaders of the networks that participated in the study stressed the inexperience of many investors.
Other major weaknesses include the quality of the projects, which are usually not yet in the investment phase, and the unfamiliarity of many entrepreneurs with the basics of investment.
Five Recommendations
The report highlights five target areas to strengthen and promote the functioning of private investor networks.
Read full article on the IESE Insight website.