Angel investing in an austerity economy – the take-up of government policies in Portugal

Business angels (BAs) are recognized as playing a significant role in stimulating entrepreneurial activity. With the decline in both bank lending and venture capital investment since the onset of the global economic crisis, government efforts to stimulate BA activity have become a more significant component in strategies to increase the level of entrepreneurial activity. This paper examines the responsiveness of angels to such initiatives in so-called austerity economies – countries that were hardest hit by the financial crisis of 2008 and subsequent global recession and, as a consequence, had to take extreme economic and fiscal measures to reduce their budget deficits. We examine this question in Portugal which experienced one of the deepest recessions in the European Union following the implementation of severe austerity measures. This study confirms that government intervention to support angel investing can have a positive impact. However, the different types of intervention have varied in take-up rates. Other countries can learn from the Portuguese experience in three ways: the types of interventions that have the highest and lowest levels of take-up, the link between the design and the take-up of incentives, and types of intervention that should be considered but have not been implemented in Portugal.