The "virtuous circle" of informal investment activity: evidence from the UK

Abstract

This paper seeks to quantify the frequency, scale and demographic characteristics of informal investor activity in the UK over a three year period 1999-2001 using population survey data. 1.1 million informal investors invest £12.8 billion per annum. The 'typical' informal investor would appear to be a well educated, middle-aged male from a higher social class with direct experience of starting-up a business. The importance of multiple forms of entrepreneurial experience suggests the existence of a 'virtuous circle'. Successful entrepreneurs metamorphose into informal investors and become an important source of both finance and relevant experience to other, as yet, un-established entrepreneurs.