Abstract
Angel investor decision-making is different from that of venture capitalists. Though both groups invest in new ventures, angel investors are more concerned with agency risk, whereas venture capitalists are more concerned with market risk. More so than venture capitalists, angel investors largely succeed or fail based on their ability to make accurate judgments about the entrepreneurs they back—and decide not to back. Importantly, some angel investors appear to have noneconomic motivations to invest in risky startups. This chapter reviews the extant literature on angel investor motivations and decision-making and entrepreneur personality and passion so as to orient researchers on how these research streams may coalesce. The chapter ends with a discussion of both interesting research ideas and practical implications for angel investors and entrepreneurs.
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