Angel financing in South Africa

Abstract

The purpose of this research report was to explore angel finance in South Africa. Its aim was to gain a definition of what angel finance means in a South African context, the factors influencing them and the pre- and post-investment frameworks they employ. An interpretivist qualitative methodology was employed in the study as this is a relatively under researched area of finance and entrepreneurship. The research found that the definition and understanding of angel finance in South Africa is very much in line with international best practice but it would be worthwhile separating them into two distinct groups based on their level of professionalism. The research then looked at the factors facing angel financiers. It was found that issues relating to economics and regulations were the biggest influences. The research then explored the pre-investment criteria where the results showed that trustworthiness and the quality of the management team were the angel’s top criteria when evaluating a potential deal. The research then focused on the post-investment involvement and monitoring frameworks. Hands-on involvement and the use of contracts, staggering of investments based on milestones, as well as board control were all found to be used as control mechanism employed by angels in South Africa.