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Financing Innovation in the U.S. and Western Europe

April 18, 2017

Americans admire entrepreneurs. It's in our culture—from our colonial ancestors to Manifest Destiny. We support those who are creative, show initiative and pursue opportunities, despite the odds.

"Americans admire Elon Musk and Pay Pal's Peter Thiel, and those with that 'cowboy mentality,'" Peter Klein, professor of Entrepreneurship and senior fellow for the John F. Baugh Center for Entrepreneurship & Free Enterprise, said. "Perhaps we are culturally more inclined to the idea of innovative, high-risk startups and their innovators."

In fact, the U.S. is known for its support of entrepreneurs, specifically for its strong angel sector. Angel networks provide resources for entrepreneurs who are still in the early stages of business development, and too new or risky to acquire venture capitalist resources. Angel networks are investor networks providing early stage capital to entrepreneurs with developed business plans. It's a key service to those in the early stages of starting a business.

"Many great ideas could never happen without angel investors," Klein, who started working at Baylor in August 2015, said.

But Western European countries don't have strong angel networks like the U.S., so those countries are interested in understanding why their networks are weaker.

Klein and Catherine Deffains-Crapsky, professor at the University of Angers in western France, decided to investigate and compare their countries' angel network differences—and explore whether those differences are governmental, historical, geographical or cultural. And, ultimately, if those factors are the reasons the angel networks are more or less robust, is there a way for angel investors in France and other Western European countries to improve the climate for angel networks?

In their recent article, "Business Angels, Social Networks, and Radical Innovation," the pair summarizes the state of angel networking in the U.S. and Western Europe. It builds upon social network theory—the advantages and disadvantages of networks, like angel networks, and how they're structured. For example, this study explores angel investors as "bridges between entrepreneurs" and other resources. Networks allow for connections and mentorship opportunities.

The article will appear as a chapter in a forthcoming book.

In addition, Klein and Deffains-Crapsky are currently doing survey work in France, asking angels what they look for in investing opportunities and how they find those entrepreneurs.

"I want to help the U.S. economy become more entrepreneurial, and I want to learn from others," he said. "I want the world to do [entrepreneur support] right, and comparing other countries is the best way to do that."

Because of that goal, Klein is interested in free enterprise. In fact, part of the reason he joined the faculty at Baylor is because of his interest in the efforts of the Baugh Center. Additionally, he will assist the Entrepreneurship & Corporate Innovation Department with the new Entrepreneurship PhD program, which will welcome its first class in fall 2016.

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