Abstract
Business angel networks act as a financial intermediary between investors and start-ups and are a means of overcoming the problem of matching entrepreneurs and business angels. In reality, most business angel networks do not accomplish this goal. Using the results of an empirical survey and five exploratory case studies, we develop three propositions concerning the business model of angel networks. We find theoretical and empirical evidence that angel networks actually foster adverse selection during the investment process. Consequently, angels, especially serial business angels, do not receive sustainable benefits from network services and actually face new risks during the investment process.
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