Micro-angel investments of men and women: The role of institutions

Abstract

Informal investments are a key source of financing for startups. In this research article, I focus on how institutional weakness can impact informal investments of male and female micro angels. To this end, I rely on information from more than 50,000 individuals from 88 countries who provided funding to family and relatives, acquaintances (co-workers, friends or neighbors), and strangers with good business ideas during 2014–2018. I conclude that weak institutions may decrease the likelihood that women will become micro-angel investors. However, weak institutions may encourage men and, to a lesser extent, women to invest in business ventures of acquaintances and strangers, as opposed to those of extended family. Robustness checks involving cultural dimensions and gender equality confirm these findings. Furthermore, statistical evidence shows that the decisions of whether to become a micro angel and how much to invest are independent.