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A key roadblock for innovative new businesses in Hungary is the relative lack of capital for early stage startup companies. One way this gap is filled in other countries is the ‘business angel’ - a wealthy individual who brings not only his cash, but often his expertise, contacts and elbow grease.

Here in Hungary I know a handful of business angels, and I’ve met similar people in the Czech Republic. They seem to be few and far between - at least in comparison to places like the United States and Britain. Yesterday I came across this study which, for the first time, offers a formal snapshot of the angel phenomenon in Hungary.

So how many are there? The answer depends on how you define a business angel.

According to this research, conducted by Andreasz Kosztopulosz of the University of Szeged, just 18 individuals in Hungary have played the role of business angel. However, Kosztopulosz cites a previous study, the Global Entrepreneurship Monitor, which counted 144,000 informal investors.

The difference is the GEM study included friends and family of the entrepreneur. These people are clearly a valuable source of capital, in Hungary as well as elsewhere, however their commitment is emotional rather than commercial.

Kosztopulosz compared Hungary’s 18 business angels to similar groups in the United States, Britain and Norway. His conclusions showed that Hungary’s angels are actually more active than those in other markets, investing in a larger number of deals. The average investment in Hungary is lower, however, most likely reflecting the capital needs of local entrepreneurs. Kosztopulosz concludes that Hungary’s angels are at least as sophisticated as those in other markets, although their numbers are vastly smaller.

The report also contains a number of recommendations. Kosztopulosz emphasis that the growth of Hungary’s business angel sector is critical for the development of local entrepreneurship. He proposes tax breaks for private investors, such as those adopted in the United Kingdom. He also suggests that increasing public awareness and education may be beneficial.