France has caught up
When it comes to the commitment of business angels, two countries in Europe lead: in Great Britain, about 5,700 business angels and in France, about 3,650 startups provided capital and expertise in 2009. In the same year, private investors closed more than 300 deals in both countries. They invested €53 million in Great Britain (including joint investments) and up to €64 million in France. However, a look at the recent past shows a clear trend: while the UK has traditionally had a strong business angel culture, it has consistently topped European rankings in recent years, consistently having between 4,500 and 5,500 entrepreneurs since 2005, and France in 2005. He only had about 1,300 business angels.
Germany is behind
Since there is currently no reliable information on the number of business angels in Germany, it is difficult to make a direct comparison on this basis. Current estimates put the number of business angels in this country at around 1,400 – which equates to just under a quarter of the number of angels in England. Even if it is necessary to treat the comparison of numbers with caution, the assessments obtained from daily practice show that Germany is in dire need of development. This is again when we take into account that Germany is the largest economy in Europe with a GDP of 2,300 billion euros, and that with 82 million inhabitants, about a quarter of the people living in this country live in this country. France or Great Britain.
Great Britain is a pioneer
In Europe, Great Britain is a leader when it comes to business angels. It is therefore not surprising that the first European Business Finance Networks (BANs) were established in the British Isles in the early 1980s. Today there are about 80 of them active in Great Britain. By this criterion, France also has an almost equally strong scene, with 80 networks in 2009. This number, which has been rising continuously in recent years, can be attributed primarily to the very active umbrella organization France Angels, which It has built organized networks across the country since the mid-1990s. Germany, on the other hand, appears to be a laggard: regional networks and the Business Angel Network Germany (BAND) were only established as an umbrella organization at the end of the 1990s. Although about 40 networks are now active, this number can be classified as rather small compared to Germany’s economic strength. In addition, unlike France, development is stagnant. Although some new organizations have emerged in recent years, some have ceased their activities.
English and French angels are preferred
There are also national differences in funding activities. While there is in fact no (significant) tax support for angel business investments in Germany, the corresponding framework conditions in the other two large EU economies are much friendlier. For example, French business owners can deduct 25% of the total amount invested from income tax up to a maximum of €20,000. In addition, when calculating wealth tax, 75% of the invested amount can be claimed up to a maximum of €50,000. In the UK, tax incentives for corporate angels are more comprehensive. Thanks to the so-called Enterprise Investment Scheme (EIS), angels receive tax benefits in three ways: first, there are advantages if they invest, second, if they make capital gains, and third, if there are losses. More recently, conditions were further improved in March 2011: in the future, British angels will be able to deduct 30% instead of the previous 20% of the acquisition costs of acquired shares from tax.
Great Britain is the leader in business angels in Europe, but France has caught up strongly in the past five years. In Germany we can certainly learn a lot from these experiences. The first and important step is to provide tax incentives based on the UK model. In addition, other factors may also be important to revitalize the scene: strengthening existing angel investor networks and building new ones or better communicating the importance of angel entrepreneurs in the community.
To the authors
Brigitte Bowman is Managing Director of GoBeyond Ltd. and Chairman of the European Business Angels Network (EBAN). Arnie J. Hostrup is Managing Director of netzwerk nordbayern and member of the Board of Directors of EBAN.
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