One of the main characteristics of the informal venture capital market is that intermediaries or economic agents, both on the supply side of capital and on the demand side for it, do not have sufficient information to operate effectively in this market.

Business angels do not have sufficient sources of information about investment opportunities. Most often, they act passively, relying on the recommendations of friends and business partners when making investments. Most informal investors agree that existing sources of information are ineffective. This is supported by the fact that, according to many studies, active informal investors would finance a much larger number of projects if they had more information about existing opportunities.

In addition, there are significantly more potential, real or “virgin” business angels than active ones. Thus, the actual supply of informal venture capital is much lower than the potential.

Business angels tend to operate anonymously and do not advertise their capital investment opportunities widely. This makes it difficult for entrepreneurs to reach out to potential informal investors. In addition, many start-up entrepreneurs do not have the skills to present their projects to investors, which is especially typical for entrepreneurs who have come out of academia. Therefore, a significant share of the demand for business angel resources remains unrealized.

One of the most effective solutions to the lack of information and the gap between supply and demand in the informal venture capital market is the establishment of business angel networks. The purpose of these networks is to enable entrepreneurs to present their projects to a large number of both existing and new business angels at once. Potential investors, in turn, get the opportunity to study a significant number of projects, while maintaining anonymity until they are ready to negotiate with specific entrepreneurs.

Business angel networks are widespread in the US and UK; but also exist in France and Australia. They usually operate as non-financial institutions that aim to organize an informal venture capital market and generate their income from the contributions of users connecting to the network. In most cases, business angel networks operate on the basis of the Internet. Investment projects are placed on the network by entrepreneurs themselves or organizations specializing in small business incubation or fundraising (fundraising).

Potential investors can be business angels themselves or their representatives, as well as:

investment funds;
special departments of banks;
corporations wishing to acquire shares in other companies to join the latter.
As a rule, the investor gets access to the database of investment projects. Choosing a project that interests him, he makes a request to the network and the entrepreneur who posted information about himself is automatically sent an e-mail or fax with the name and telephone number of a potential investor. The decision to contact the investor remains with the entrepreneur.

The main functions of the organization that oversees the network include:

1) primary analysis and selection of entrepreneurs' applications;
2) technical support for users through the "hot line";
3) systematic information about new registered projects and new members of the network;
4) a detailed description of the projects presented in the network;
5) regular newsletter for network members.
Some business angel networks also host investor forums, where entrepreneurs make short presentations to an audience of potential investors. In addition, an important function of networks is to help entrepreneurs in the design and presentation of their projects. This includes assistance in preparing business plans, as well as training in rhetoric and negotiation skills. Some entrepreneurs will benefit from advice on protecting intellectual property.

The tasks of business angel networks may include activities to increase awareness of the informal venture capital market among wealthy people with entrepreneurial experience, as well as accountants, bankers, consultants, in order to increase the supply of venture capital.

This can be achieved through appropriate publications in specialized publications and advertising campaigns in professional associations.

Still, it should be noted that the effectiveness of business angel networks is determined by the fulfillment of their main task: providing business angels with high-quality information about investment opportunities that may be of interest to them.

Experience shows the following:

the informal sector is the most significant source of venture capital for small and medium enterprises;
the informal venture capital market is important primarily for small firms that are in the early stages of their development, “according to

sowing” and “starting”, this is especially true for high-tech companies;
support of the company by a business angel is not limited to the provision of financing to a small firm, but also includes comprehensive assistance in doing business;
receiving an investment from a business angel significantly increases the chances of a small company to receive larger financing from other sources at the further stages of the project;
due to lack of information, the work of the informal venture capital market may not reach the optimal level, and therefore mechanisms are required to help business angels and entrepreneurs find each other.
Like the venture capital market in general, the informal market is currently in its infancy. Nevertheless, we can talk about a number of factors that favor its development in the field of innovative business.

The private sector has accumulated significant financial resources, in particular in the sphere of trade, whose owners are ready to invest them in the "real" sector, since the profitability of trade and financial transactions after August 1998 decreased.
As a result of devaluation, the urgency of creating import-substituting and export-oriented industries is growing.
Many successful entrepreneurs have scientific and technical training and experience in scientific institutions, which can contribute to their decision to become business angels.
Indeed, many consulting services working in the field of innovative business are approached by informal investors interested in financing projects related to the promotion of new technologies to the market. On the other hand, there are serious problems on the way to the development of the informal capital market in the field of innovative business.

The high risks inherent in innovative projects at the early stages of implementation are superimposed by general economic and political instability and uncertainty.
Difficulty in finding suitable candidates for investment due to poor infrastructure development.
Low level of entrepreneurial culture and skills required in the preparation of investment projects.
A significant amount of criminal capital in the economy, which increases the cautious attitude of entrepreneurs towards investors.
Since the high-tech business is just developing, only a few business angels have an understanding of the peculiarities of moving to the technology market.
If general economic instability has to be taken for granted, and it is likely that it will reduce the efficiency of business as a whole for a long time to come, then it is quite possible to overcome other obstacles.

An effective mechanism for the development of an informal venture capital market can be the creation of networks of business angels based on consulting services that provide services to small enterprises in the scientific and technical field. Firstly, they could become a source of information for business angels about promising projects that require investment. Secondly, they could help to bring technological developments to the stage of products ready for commercialization and to establish contacts between entrepreneurs and investors. Thirdly, they could carry out a careful selection of network participants, both from potential investors and from entrepreneurs in need of financial resources.