Angel Investors Research Articles

Endure, escape or engage: how and when misaligned institutional logics and entrepreneurial agency contribute to the maturing of entrepreneurial ecosystems

ABSTRACT This study explores how entrepreneurs respond when their expectations misalign with the capabilities, behaviours and priorities of angel and venture capital investors in a maturing entrepreneurial ecosystem. Based on 38 interviews with New Zealand founders, we theorize three qualitatively different behavioural strategies – endure, escape or engage – that entrepreneurs enact in the face of such misalignment. We also consider the ramifications of these strategies for the broader context in which entrepreneurial activity occurs. Some strategies reproduce the suboptimal ecosystem conditions that entrepreneurs encounter, whereas others contribute to the sustainable growth and maturity of the ecosystem. Grounded in an institutional logics perspective, our findings offer a nuanced view of entrepreneurial agency in the face of an entrepreneurial ecosystem’s institutional constraints. We challenge the deterministic notion of contextual forces that prevails in the literature and reveal how and when resource-sourcing decisions and actions stimulate endogenous change in entrepreneurial ecosystems.

Potential Power in a Quasi‐Competitive Market

Through a market‐level examination of shifts in power, this article investigates the impact of potential power and actual power variables on negotiation outcomes viewed in terms of capital ($) in exchange for equity (%). The object of the negotiation is an embryonic firm, and the negotiation task is an exchange of capital invested by the angel investor for equity ownership offered by the entrepreneur. The structure of the interaction is an (n) versus (1) negotiation context with the following generalizable conditions: (1) competition exists among the set of buyers, (2) cooperation is allowed among the set of buyers, and (3) all parties have the ability to walk away. Our hypotheses can be summed up in the age‐old question: Is greater value placed on a bird in the hand, or two in the bush? Analyzing the final negotiated outcomes in relation to a common starting point across 147 market instances, we find that potential power initially has a stronger significant impact than actual power. However, after accounting for the impact of coalitions, actual power variables become highly significant while potential power variables become insignificant.

Common evaluation criteria used by business angels and entrepreneurial team strength as the dominant factor affecting angel investment decisions

Common evaluation criteria used by business angels and entrepreneurial team strength as the dominant factor affecting angel investment decisions

Business Angel Investment as an Informal Learning Process: Does Experience Matter?

AbstractThis paper addresses the question of how the informal learning processes of angel investors shape the way in which they assess new investment opportunities. Previous research has suggested that angels learn from their previous investment activity. However, the measurement of investment experience as a function of years of investing and number of investments made does not take into account how, and to what extent, learning occurs and how it impacts investors’ decision‐making. To address this deficiency, we suggest a dynamic model of informal learning which incorporates the informal learning typology developed by Schugurensky and extended by Bennett, as a conceptual framework to understand how learning experiences impact angel investment decisions. Based on interviews and verbal protocol analysis with 30 investors, we demonstrate how learning impacts learning processes and outcomes as angels assess an investment opportunity. The findings highlight the importance of supporting angel learning with support for angel groups and angel training programmes.

Crowdfunding as a modern direction of business angel investing in Ukraine

The article is devoted to the problem of regulating the accumulation of business angel investments for the implementation of innovative startup projects by small and medium enterprises and the issues of their legal regulation, namely the creation of affordable and effective legal means of venture capital. It is believed that the domestic legislator should pay special attention to crowdfunding.
 The purpose of the article is to analyze the opportunities for the development of crowdfunding in Ukraine as a modern direction of business angel investment in innovative business activities.
 The recommendations and strategies of the world's business angels are useful for practical work on the study of attracting venture capital. However, problematic aspects of crowdfunding have not yet been covered in the domestic legal scientific literature.
 The article considers the application of the possibilities of civil legal regulation of crowdfunding development in Ukraine. The specifics of crowdfunding for attracting investments from voluntary individual venture investors via the Internet have been studied. Leading foreign experience is analyzed and features and obstacles of application in domestic conditions are defined.
 It is seen that properly organized crowdfunding platforms by private venture investors at both legislative and administrative levels will be a significant achievement in supporting small and medium enterprises innovation, provided: 1) consolidation of the individual venture investors’ legal status at the legislative level; 2) the availability of open online platforms with an easy way to find them on the Internet; 3) regulation of the online platform crowdfunding participants’ interaction within the existing contractual structures provided by the Central Committee of Ukraine, duly designed and posted on the platform's website.

Zoomvesting: angel investors' perception of subjective cues in online pitching

Purpose The COVID-19 pandemic transformed angel investment meetings from in-person to online. The purpose of this paper is to explore whether this move affected angel investors' perception of subjective behavioral cues in pitch sessions within a large Brazilian angel group. Design/methodology/approach This study followed an exploratory approach using a triangulation process that combined observation, documents and interviews. Data collected by observation, document studies, and interviews were themed, coded, and organized during the research. Findings The move from in-person to online pitches did not seem to affect levels of trustworthiness or arrogance as angels assessed more message content during Q&A sessions. Body movement, gestures and “eye gaze” (i.e. the look on a presenter’s face) played a central role in passion assessment during in-person meetings. Body language was highly limited during online sessions and tone of voice became the main source of passion assessment. Research limitations/implications The findings of this study suggest that pitches at online meetings affect angel investors' perception of founders' subjective cues, particularly cues pertaining to passion. Entrepreneurs should be trained to convey passion with tone of voice and to improve their body language in the context of webcam use. The interviews with volunteer sampling were subject to volunteer bias. Additionally, the findings may be affected by cultural context. Practical implications A practical contribution of this study is to highlight the need for entrepreneurs to be trained for online pitches. In an online setting, body language is limited, but it is still possible to use one’s hands and tone of voice to connect better to investors. Originality/value This study is unique because it captures the transition of angel investment meetings from in-person affairs before the pandemic to online meetings during the pandemic crisis. These unique circumstances provided a real-world laboratory to observe founders' subjective cue effects on angel investment decision-making.

Algorithms and venture investment decisions: better, fairer or biased?

PurposeThis paper is a rejoinder to the work of Blohm, Antretter, and colleagues recently published in both Entrepreneurship Theory and Practice and Harvard Business Review titled “It's a Peoples Game, Isn't It?! A Comparison Between the Investment Returns of Business Angels and Machine Learning Algorithms” and “Do Algorithms Make Better – and Fairer – Investments than Angel Investors?”, respectively.Design/methodology/approachWhile we agree with authors of prior scholarship on the importance of counteracting human biases, honing expert intuition and optimizing the odds of success in investment decision-making contexts, in the spirit of open academic discourse, this paper respectfully challenges some of the underlying assumptions concerning algorithmic bias on which prior work is based.FindingsInvesting remains part art and part science, and while algorithms may begin to play a more significant role in investment decision-making, human intuition remains hard to imitate. In both people and in algorithms, sources of bias remain both implicit and explicit and often have systemic roots, so more research continues to be needed to fully understand why algorithms produce potentially biased outcomes across a wide array of contexts.Originality/valueThis paper contributes to our collective understanding on the use of algorithms in making investment decisions, highlighting the fact that bias exists in humans and algorithms alike, even when the best of intentions are present.

An evaluation of the investment of the delivery industry in America a specific example for DoorDash

We can still see that the delivery industry in American is still growing and has not mature. To analyze it, I use the traditional swot and pestle analysis. These two tools are more accurate when we need to judge low-end products like the delivery industry. Also, I use financial analysis to deal with the data. The conclusion for most investors is not to recommend investing in these companies because the delivery industry is unstable now. DoorDash is a great example to prove. For the decision of whether investing DoorDash or not, I think it depends. Because the market in America is always that big, there has to be someone to occupy the market, but just as I mentioned, the first person to figure out the way to save their operating cost can be the winner, because the gross profit seems cannot change so much in the future, in a food-related industry, the consumer's bargaining power is pretty strong. It may not invest in this industry unless investors are angel investors and willing to take the risk.

Why Small Deals Don’t Get Done: Evidence From Rural Entrepreneurs

For myriad reasons, rural entrepreneurs may want to harvest by selling their business. While these entrepreneurs may look for inspiration to larger, public deals, there are few relevant insights to glean from these deals. Despite the high stakes involved for rural entrepreneurs and potential buyers, researchers have placed little attention on dealmaking at the lower end of the spectrum. We address this lack of research by answering the research question: Why do deals involving small companies go unconsummated? Because research on why large deals fall through is sparse and of limited applicability, we ground our research using insights from the venture financing arena (venture capitalists and angel investors) about why deals between entrepreneurs and investors do not close successfully. Applying a novel dataset from an economic development effort in a small southwestern U.S. city, we analyze the reasons why an investor group investigated 20 potential small deals, but none eventually closed. We found that issues both with the potential buyers and sellers led to the deal failures, with issues involving the valuation and also the selling entrepreneur being the most common deal-breakers. Furthermore, through this investigation, we gained insights into the challenges of an investor-driven model for economic development.

암호화폐공개(ICO) 투자 참여의도 영향요인 분석

ICO(Initial Coin Offering) based on Blockchain technology is in the spotlight as a method of investing funds for early start-ups. ICO is an investment method like as Angel Investment or Venture Capital, but it has unique characteristics that are different from other investment methods because it raises fund from the people who have enough fund, but most of them are not specialist in investment. This study analyzes the intention of investment and influencing factors in ICO. The theoretical model was built based on TAM(Technology Acceptance Model). To test, hypotheses, measurement model and structural model was verified with a survey of 187 samples who are potential investors to ICO. The research model was enough to find influence factors to ICO investment intention with the samples. The structural model showed the strong relationship among the perception of easy to use, usefulness, attitude, and intention to invest on ICO, but the quality of investment information about the offering company did not affect the usefulness of ICO. Concludingly, traditional TAM approach is enough to find influence factors on ICO investment intention like another technology based services.

Signaling Information Management in Entrepreneurial Firms' Financing Acquisition

Research has identified the significant effect of new ventures’ signaling information management on their ability to secure private equity financing. This study adopts an integrated signaling and screening perspective to investigate investors’ differing perceptions of signals from ventures, across early financing stages. It proposes a three-step interpretation process. Based on an inductive multiple case study of signaler‒receiver dyads, it finds that to reach a financing decision, angel investors extract a characteristic signal as the fundamental type, orchestrate an acting signal as a supplementary type, and scrutinize the consistency between both. However, venture capital investors extract an action signal as the fundamental type, orchestrate characteristic and endorsement signals as complementary types, and scrutinize the consistency among all three types.

What differentiates angel investors in pre-seed versus seed-stage investments? Evidence from India

PurposeAngel investments are increasingly getting specialized. In recent years, start-ups are raising pre-seed funding before seed-stage funding. Investors in pre-seed and seed-stage companies commonly are angel investors. The purpose of this paper is to understand the differences between these two groups of angel investors.Design/methodology/approachData for this study obtained from angel funding deals from the sources such as Venture Intelligence, VCCEdge, Keiretsu Forum, Dealcurry and The Chennai Angels. A total of 732 angel investments made by 405 investors during 2014–18 were used in the analysis. Non-parametric tests and regression estimations were used to identify the differences between angel investors investing in pre-seed and seed-stage ventures. An index was developed to measure the extent of syndication in angel investments and used as an independent variable in the regression.FindingsThere are significant differences between angel investors investing in pre-seed and seed-stage ventures. The results show that angels with more industry-specific experience make a higher proportion of investment in seed-stage ventures. Seed-stage ventures attract investors from Tier-1 cities, whereas the pre-seed stage has higher investors from smaller cities. Though the investment size is smaller, the extent of syndication is greater in pre-seed stage investments.Originality/valueTo differentiate the angel investments between pre-seed and seed-stage funding, this study uses data from Indian start-ups. Further, this study develops a composite syndication index to measure the extent of syndication in angel investments and assesses its impact on an angel investor’s choice of pre-seed stage investments.

Business angel investing during the covid-19 economic crisis: evidence from Scotland

ABSTRACT The onset of the coronavirus pandemic in early 2020 quickly gave rise to a concern that the resulting economic uncertainty would produce a collapse in angel investing. In view of the critical role that business angels play in financing the start of the entrepreneurial pipeline, a decline in their investment activity would have a negative effect on the ability of entrepreneurs to start and commence the scaling process which, in turn, would compromise an entrepreneur-led economic recovery from the coronavirus pandemic. This paper draws on two unique data sources on investments made by business angels in Scotland before and since the onset of the pandemic. It shows that business angels continued to invest since the onset of the crisis although their investment activity declined sharply between Q2 and Q3 2020. Investment activity stabilising in Q4 and has significantly increased during 2021 and is now above pre-Covid levels. Angels have increased their emphasis on follow-on investments and in businesses that have raised one or more previous rounds of funding. This highlights a potential problem for entrepreneurs seeking to raise their first round of angel funding that policy-makers need to address.

Towards a Systemic Approach to Business

Ram’s career has spanned over 40 years, during which he has donned multiple avatars: corporate leader (CEO), business builder, government advisor, angel investor and runaway monk internship. He is presently a systemic leadership coach. In this article, he argues that Indian leaders are schizophrenic. On the one hand, they are torn between the inherited cultural values of harmony and family obligations, and on the other hand, a product of imbibed Western B-School concepts of professional management and profit above all else. This dichotomy leads to hypocrisy and duplicity in Indian business. This is evidenced by treating people as means to an end rather than resources, much talked about, but not practised. Unlike their more forthright Western counterparts, who make no bones about profit making, Indian business leaders pretend to be of service to society and the system; yet acting only for personal gains of wealth and power through manipulation and lack of transparency. Ram shares his experiences on Indianness and the Indian business leaders. He explores where the hypocrisy may possibly emanate from, how this behaviour is at odds with changing generational needs and what are the likely fallouts even while pointing to emerging trends of systemic approach moving from diversity to unity, built on people engagement and collaborative teamwork in leadership. Indian companies and leaders, he argues, have what it takes to be far better and greater than they are now.

Grants, Funding, Awards and Recognition in Healthcare Innovation

For an idea to be validated, prototyped and tested, adequate financial planning plays a major role in the long journey of the idea from the brains to the market. There are various ways of getting funds for the startup. The founders usually start with their own money from their savings or some borrowings from family and friends which is called bootstrapping and is very common and crucial, akin to doctors starting their own clinics and small nursing homes. As they start to grow, large funds are needed in the early stage to set the foot firm with the help of an angel investor/ seed investor which is like starting a full-fledged hospital. The Venture capitalist comes in at a stage when the idea is proven and started with operations, early-stage customers and has a major potential to expand, just like when more branches of hospitals are planned. Private equity companies and investment banks are those who are keen to invest in companies who have proved themselves beyond doubt with strong leadership in the market and are looking for a major return on investment by making the company bigger, which is like planning a pan India network of the hospital chain. These investments happen multiple times or rounds at various stages of the company usually termed series A to series D or E and ultimately leading to the Initial Public Offering when it goes public from private holding. This funding journey is a well-planned effort quite specific to the investment stage, investor type, and their preferences. The recognition of the startups and their ideas plays a major role in them reaching to market and access to funding opportunities. The funding and national recognition from various govt. and private agencies such as BIRAC, FICCI, NASSCOM, Wellcome trust, and Villgro and international agencies such as CAMTech, Bill and Melinda gates foundation, Grand Challenges Canada, Stanford, and Harvard gives the much needed attention from the potential investors and is a major advantage which should be utilized well. Social media recognition plays a major role in recent times which has the potential to make an innovation “viral” and reach millions of customers and make relevant investors and govt. agencies notice, which can be a huge breakthrough for the company if the innovation has a social impact. We would like to make this article more practical, experiential, and contextual for better connect with pediatrician colleagues.

Seed-Stage Success and Growth of Angel Co-investment Networks*

Abstract Using hand-collected data, we show that coinvestment is widespread in the angel investment market, even among seed-stage startups. Individual angels with demonstrated seed-stage success experience an increase in the quantity, quality, and geographic and industry spread of their coinvestment connections relative to unsuccessful peers and are rewarded with more deal flow. These results are stronger for less-established angels and for angels whose successes are more indicative of their ability. Success also begets more success: the portfolio companies of successful angels are more likely to receive follow-on financing, especially from VC firms. Our results highlight how angels grow their coinvestment networks. (JEL G24, L14, L26, M13).

Incentive Provision in Light of Expertise and Operational Involvement of Angel Investors

Angel investors provide a unique role in startup entities: in addition to providing financing, they also provide expertise and make critical operational and managerial decisions. As a result, a startup not only seeks funding from its angel investor, but also strives to ensure that their expertise promotes entrepreneurial success. This study formalizes a model of optimal equity sharing with angel investors in light of the facts that (i) they have private information about their expertise, (ii) the expertise impacts the efficacy of subsequent operating decisions, and (iii) equity sharing alters control rights linked to these decisions. We demonstrate that an entrepreneur will exhibit seemingly excessive optimism in decision‐making when angel investors claim they bring high expertise (skills) to the table. This apparent optimism is not a sign of naiveté but rather an effective device to discipline boasting by angels. The results demonstrate the critical role of expertise and decision rights in constructing ownership‐sharing agreements with angel investors. They also demonstrate a case in which the private information of investors (rather than that of insiders) is important, and how such adverse selection concerns entail aggressive operational choices, rather than the typical response of caution, coupled with limited equity usage that accounts for not just the transfer of ownership, but also the transfer of decision rights.

Understanding Early Stage Investors´ Motivations: A Resource Exchange Lens

Social identity theory has gained momentum across management disciplines, yet limited research has questioned role of early stage investors’ identity in entrepreneurship. This research uncovers the underlying motivations and associated identities of active angel investors from Switzerland. Our results indicate that there are four major types of angel investors and that they make investment decision according to their own dominant identities. It is our aim to shed light on why investment decisions are not consistent across angel investors when presented with the same start-up investment opportunity.

Angels and Demons: The Negative Effect of Employees' Angel Investments on Corporate Innovation

A firm's economic value of patents decreases by 3.3% - 5% when its employees are investing their personal wealth in start-ups. We refer to such angel investors employed at public corporations as angel employees. We establish causality with matching and instrumental variable regressions, which rely on quasi-exogenous competition in the early-stage financing market. The negative relationship is stronger for angel employees in innovation-related roles, if the linked start-ups are more time consuming, and for exploratory patents. Start-ups financed by angel employees are more likely to successfully exit. Our results indicate that angel employees divert time and effort from their employers to their personal start-up investments. Overall, we highlight unexplored negative effects of angel investors in our economy.

Angel Investor Impact: Clues from the Shark Tank

This paper explores the investment impact and performance of a unique group of angel investors, those featured on the television show, Shark Tank. We explore the relationship between their individual characteristics such as their experience, reputation, and network with the performance of their investments. Our findings are counter-intuitive in that we find that many characteristics do not appear to impact performance as measured by survival and website traffic. Furthermore, we found that the Sharks do not have the ability to select outperforming companies on average. However, we found the reputational impact of Shark Tank as a venue is significant.