How does Angel investment contribute to local economic development?
Angel investment offers one component of a healthy startup ecosystem. There are two key elements to that benefit. First, Angel investment helps to develop a culture of risk taking. Those who have been successful angel investors, might be more inclined to participate in other aspects of the startup ecosystem and fund more local startups. In some cases, angel investors have launched their own startup businesses and have some good experiences to share. More simply, a successful angel investor might be more inclined to offer additional mentorship to entrepreneurs or participate in other aspects of entrepreneurial service provision, such as ‘pitch’ competitions to help entrepreneurs practice their pitches.
Second, Angel investment provides a rigorous due diligence process. This process helps the startup improve their business model and readies the startup to expand their business into regional, national, and international markets. A rigorous due diligence process also helps to lower the risk for angel investors so that potentially more funding can be available from the angel community in the future.