In addition to direct investment funds, there are other forms of capital that are complementary to direct investment – most notably angel capital. It is increasingly important for the innovation intermediary to have access to angel capital. Angels are prepared to invest early-stage capital earlier than traditional venture capital ﬁrms in start-up ventures: they provide about 90% of seed and early-stage outside equity capital for start-up entrepreneurs. These investors are traditionally experienced high net worth individuals, institutions and other accredited investors. In 2006, total angel investments reached $25.6 billion, as reported by the Center for Venture Research at the University of New Hampshire, thus surpassing the total venture capital investments of $25.5 billion as reported by PricewaterhouseCoopers.
Angels are often interested in leveraging other public and private investment funding, and have been known to form angel networks to distribute risk. They normally invest in local or regional deals, primarily because of the very personal relationship that these deals require. The critical role the innovation intermediary ﬁlls is to subsidize the staff to run the angel group: investors prefer their capital to be invested as equity without a signiﬁcant portion going into management fees.
The Mid-Atlantic Angel Group (MAG) is a member-managed private equity investment fund that bridges the gap between seed investments and institutional venture capital. It was created and managed by Richard Bendis and Chris Starr at Innovation Philadelphia. MAG leverages public and private funding resources and networks by providing equity capital to seed and early-stage, technology-based high-growth companies. It has 89 unique investors, including public dollars from the states of Pennsylvania, New Jersey and Delaware. MAG was the ﬁrst angel fund to be established in the region, even though angels had been active in Philadelphia for over twenty years. The management of MAG has now been transferred to the Science Center in Philadelphia.