Business angels are feeling strained & can't cope with new business demands

The research – the first attempt comprehensively to map UK business angel activity – also found angels are now more likely to invest in organised groups. This “syndicate phenomenon” may be increasing the average angel deal size. While private investors typically back companies with less than £200,000, syndicate deals are more likely to be around £500,000.

Prof Mason said the early stage funding market had become “more messy and less distinctive”.

“Angels are occupying several steps on the funding escalator. They’ve moved up a couple of steps and left a gap at the very bottom.

“Angels need deeper pockets and more patience. The market is constipated. Without exits, angels are becoming fatigued and losing interest.”

The research, which estimates that the total UK angel market is worth £426m, was based on group membership data provided by the British Business Angels Association (BBAA) and LINC Scotland, the national association for business angels in Scotland.

Prof Mason called this the “‘visible market” and said research on “invisible angels” – those who invest individually and outside of a formal syndicate – was needed to understand early-stage finance fully, as were studies into investment outcomes.

Anthony Clarke, Chair of BBAA, said: “We were delighted to contribute data together with LINC Scotland to this new report. The results show that angel investing continues to be the most significant source of investment in start-up and early stage growth businesses in the UK."

Clarke added "The launch of this report is timely in relation to the new government’s policy on enterprise and shows the need for Government to support a range of measures to stimulate the angel market and bring more people forward into this Asset Class”.

Julie Meyer (pictured above), chief executive of Ariadne Capital, which makes early-stage investments, and also Entrepreneur Country, a community for entrepreneurs & investors, said "she was not concerned with the findings in the report".

However she put forward that she would like to see a “Wikipedia-style database” for angel investments which would encourage most investors to share information on deals and outcomes as nobody is chronicling what’s happening. Making it a better understood asset class by providing more information would encourage more to invest,” she said.

Private equity investor Luke Johnson, who owns a stake in angel network Beer & Partners, and has been very critical about how angel investing is portrayed on our TV screens on the BBC programme Dragons' Den, pointed to a scarcity of such research.

“Angel investing in Britain is a vital part of the funding solution for early-stage companies, but I have seen very little serious research showing how good the returns are – it would be invaluable to know.”