Based on my experience speaking at entrepreneurship events around the world with the U.S. State Department, I realize that access to capital is one of the primary impediments to business growth in emerging markets. As such, it's as important to bolster technical and managerial human capital, and give confidence to local angel investors, as it is to encourage young founders to assume the risk of starting a company. Access to capital remains one of the biggest challenges, because of the inherent risk profiles of startups, and the requirements of portfolio investing.
Early stage companies are inherently those with the highest risk of failure. Therefore, for an early stage investor to offset risk, they must invest in a basket of these early stage companies, or a "portfolio." Having a portfolio of many companies helps offset the risk of any one company failing, but it also predisposes that investor to a highly local strategy. If he or she has many portfolio companies, and these early stage companies are at the highest risk of failure, and therefore need guidance, it is incumbent on the effective early investor to be proximate.
All this to say, access to capital is a challenge because at the earliest stages it must be a local process. As companies grow, and as risk of failure decreases, regional capital can flow in because investors are able to confidently deploy larger checks, and have fewer companies in their portfolio, also reducing the imperative that they be as proximate. Therefore, in developing a successful entrepreneurial ecosystem, very local seed and angel capital must bridge startups into regional capital markets. That means local wealth must be reinvested, and take risk.
Perhaps seed capital is local, venture capital regional, and private equity global, purely based on the profiles of risk, and imperatives of portfolio balancing.
Highlighting some of these ideas, and the basics of angel investment, I have created a course on SkillFeed entitled "How to Angel Invest in Startup Companies." The 11 minute course is but an overview, but can highlights how interested angel investors can get involved through platforms like Angel List.
To learn more about getting started, please see my Angel List Syndicate.