They fill a gap: as BAs do not face the transaction costs faced by venture capitalists, they are able to conduct smaller investments. Studies show that, while Business Angels invest across the full range of company stages, they are the main source of funding when the deal size is under USD 1m, and they participate in a higher number of rounds of seed and start up capital than venture capital funds. Mason and Harrison note that the informal venture capital market is the largest external source of early stage risk capital, dwarfing the institutional venture capital market.
