In our last post, we mentioned a survey on angel investors in South Carolina. This was a survey we conducted through our website during 2018-2020.
It wasn’t an exhaustive scientific study with robust statistically-validated outcomes! It was, though, we think, useful data containing interesting results about attitudes to the angel investor tax credit. Of the investor respondents:
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84% indicated that the angel tax credit was a “deciding” or “significant” factor when deciding to invest in a given company.
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64% indicated that the cap on the credit was a “significant” or “moderate” concern, because the cap leads to a lower amount of credit and therefore has less influence on the investment decision.
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On average, investors indicated they invested 2-3x as much in companies eligible for the credit vs companies not eligible for the credit.
These were investors focused on South Carolina: they collectively made 209 angel investments, of which 123 (nearly 60%) were in South Carolina; angel investors generally invest close to home. Making people more willing to invest in local companies is the point of the credit, and seems to be working.
Our survey was consistent with another conducted in North Carolina in 2020 by the SBTDC. This survey (should download from here) was completed by 79 respondents covering 21 angel groups across North Carolina.
The situation in North Carolina is a little different: its angel investor credit, the NC Qualified Business Venture (QBT) Tax Credit, began in 1989 but was removed in 2013. The survey found:
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Removal of the credit had a negative impact on investing activity (fewer deals, less capital) and on investing in North Carolina specifically (with more focus outside of the state).
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A new credit would lead to more investing, with 69% of respondents saying they would invest more, including in higher risk companies and in more North Carolina-based companies.
Admittedly these are small samples of respondents and not stringently controlled scientific testing. Nonetheless, it is encouraging to see others reaching similar conclusions to VentureSouth – that these kinds of credits are helpful to stimulate local angel investing and entrepreneurial development.