FACULTEIT ECONOMIE EN BEDRIJFSKUNDE TWEEKERKENSTRAAT 2 B-9000 GENT Tel. : 32 - (0)9 – 264.34.61 Fax. : 32 - (0)9 – 264.35.92 WORKING PAPER AN ASSESSMENT OF GOVERNMENT FUNDING OF BUSINESS ANGEL NETWORKS: A REGIONAL STUDY Veroniek Collewaert 1 Sophie Manigart 2 Rudy Aernoudt ³ March 2007 2007/455 1 Ghent University. Veroniek Collewaert is Aspirant of the Fund for Scientific Research – Flanders (FWO-Vlaanderen) and greatly acknowledges the financial support of the Fund. Corresponding author: Department of Accounting and Corporate Finance, Ghent University, Kuiperskaai 55E, B – 9000 Gent, Belgium, tel. (32)9/264 79 60, fax (32) 9/264 35 77, e-mail
[email protected] 2 Ghent University and Vlerick Leuven Ghent Management School. ³ Hogeschool Gent. We would like to thank the participants of the 2006 Babson Kaufmann Entrepreneurship Research Conference (Bloomington, IN) and the 2006 RENT Conference (Brussels) for their comments on an earlier draft of this paper. D/2007/7012/26 AN ASSESSMENT OF GOVERNMENT FUNDING OF BUSINESS ANGEL NETWORKS: A REGIONAL STUDY Veroniek Collewaert, Ghent University Sophie Manigart, Ghent University and Vlerick Leuven Ghent Management School Rudy Aernoudt, Hogeschool Gent ABSTRACT In this paper we evaluate whether government intervention through the public funding of business angel networks is warranted. Based on a regional study of four BANs, we find that these subsidies reach their goals in terms of contribution to economic development and reducing financing and information problems entrepreneurial companies face. However, they are partly based on the wrong assumptions as these companies are not (yet) value creating. Therefore, we advise caution in using the market failure argument as grounds for government intervention in the informal risk capital market.