Scott Shane has written an excellent book about angel investing: Fool’s Gold, The Truth Behind Angel Investing in America. It is the best and most fact oriented book I have seen about the angel investing. Many finding are really revealing. They are from the US, but based on my own expriences I believe results would be similar in Europe and Asia too. For example, actually business angels look very different from the way that they are described in the media. The typical business angel is less wealthy, less well-educated, younger, and less likely to be retired that suggested by the stereotypical description of angels. For example, the wealth statistics are interesting, 2/3 of the angels have less than $1 Million net worth. It very much indicating that almost anyone can be a business angel.

The book also list many different reasons to invest:
1. To Make Money
2. To Get Involved with Private Companies
3. To Learn New Things
4. As a Hobby Job
5. To Find a Job
6. To Help the Community
7. Because a Friend of a Friend Has a Business

I recommend this book to every one who wants to make angel investments or entrepreneurs who look for angel investors. This book also gives many concrete ideas, how to develop angel investing. Angels can be an important source of money for many companies, and the total value of annual angel investments is greater than VC investments. But angel investments could be even more important funding source, but all players like entrepreneurs, angels, banks, VC’’s and policy makers should better understand facts of angel investing.

My conclusion was that more open market place, better deal flow, better transparency (to know companies but also investors better), and opportunities to co-invest with other angels are important areas to make angel investing work better. Angel investment market today is not effective (i.e. not enough transparency, no open deal flow, high transaction costs) and by making it more effective, we can make it much more significant.