The geography of business angel investments in the UK: does local bias (still) matter?

Business angels (BAs) - high net worth individuals who provide informal risk capital to firms - are seen as important providers of entrepreneurial finance. Theory and conventional wisdom suggest that the need for face-to-face interaction will ensure angels will have a strong predilection for local investments. We empirically test this assumption using a large representative survey of UK BAs. Our results show local bias is less common than previously thought with only one quarter of total investments made locally. However, we also show pronounced regional disparities, with investment activity dominated by BAs in London and Southern England. In these locations there is a stronger propensity for localised investment patterns mediated by the “thick” nature of the informal risk capital market. Together these trends further reinforce and exacerbate the disparities evident in the UK’s financial system. The findings make an important contribution to the literature and public policy debates on the uneven nature of financial markets for sources of entrepreneurial finance.