Informal investment networks: a case study from the United Kingdom

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Abstract
This paper reviews the nature of the equity gap facing new and growing ventures in the UK, and assesses the contribution of both demand-related and supply-related explanations of this gap. The use of informal equity investment (sources of risk capital other than professionally managed venture funds, institutional investors and public equity markets), represents one possible resolution of the new-venture equity gap. From a preliminary analysis of the UK situation, we conclude that informal sources of equity are used by a significant proportion of those small ventures in the UK which have sought external equity funding at some stage. On the basis of case-study analysis of the experience of one informal investment network the paper concludes with an assessment of some of the processes underlying the supply of and demand for informal risk capital in the UK and identifies an agenda for further research.

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