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Article
Publication date: 3 October 2016

Michael B. McDonald and Ramon P. DeGennaro

The purpose of this paper is to examine the literature on angel investors. Research on angel investors is sparse because data are sparse. Most comprehensive studies of angel…

1376

Abstract

Purpose

The purpose of this paper is to examine the literature on angel investors. Research on angel investors is sparse because data are sparse. Most comprehensive studies of angel investors have focused on the USA and UK. In these studies, definitions of angel investors and estimates of returns on angel investments vary dramatically. What can one make of this wide range of reported returns?

Design/methodology/approach

The authors examine the literature and find that the calculations of reported results are vague.

Findings

Most researchers do not explicitly report if their estimates are equal-weighted or value-weighted, nor do they say whether the results are weighted by the duration of the investment. The authors show that the unit of analysis – investment, project or angel – affects interpretations.

Practical implications

Limitations on the comparability between various studies of angel investing returns leave the current literature incomplete. They also offer opportunities for future study in the area.

Originality/value

The authors are the first to examine the angel investing literature in a comprehensive fashion, comparing between various returns found across all major studies of the subject done to date.

Details

Studies in Economics and Finance, vol. 33 no. 4
Type: Research Article
ISSN: 1086-7376

Keywords

Article
Publication date: 11 October 2021

A. Niroopa Rani Annamalaisami

Angel 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…

Abstract

Purpose

Angel 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/approach

Data 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.

Findings

There 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/value

To 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.

Details

Journal of Indian Business Research, vol. 14 no. 1
Type: Research Article
ISSN: 1755-4195

Keywords

Article
Publication date: 20 March 2017

Jaume Argerich and Claudio Cruz-Cázares

The lack of a standard definition and data sources makes it hard to compare findings and advance our knowledge in the business angel’s domain. The purpose of this paper is to…

2168

Abstract

Purpose

The lack of a standard definition and data sources makes it hard to compare findings and advance our knowledge in the business angel’s domain. The purpose of this paper is to tackle this problem by presenting a proposal of a potential definition of business angels that it based on ten issues identified in 30 years of business angels’ research.

Design/methodology/approach

The paper reviews 24 studies on business angels and classifies definition inconsistencies found in ten different issues. Those differences are compared with methodological choices on sampling and with subsequent results.

Findings

The authors observe a connection between definitional and sampling choices, and the results obtained. Inconsistent definitions can lead to results that are more than 400 times higher in terms of investment per project, for example.

Research limitations/implications

The authors believe that the main implication of proposing a standard definition of business angles could help the academia in decreasing the great observed diversity which is actually leading to inconsistent and incomparable results that limit our understanding of this phenomenon.

Originality/value

This paper differs from previous studies as it tackles the problem by identifying the definitional issues and presents a framework in order to build a consensus definition, rather than just comparing definitions.

Details

Management Decision, vol. 55 no. 2
Type: Research Article
ISSN: 0025-1747

Keywords

Article
Publication date: 11 January 2021

Garrison Hongyu Song and Ajeet Jain

This paper aims to explore the allocation of the exit value of a start-up company in market equilibrium between an angel investor and an entrepreneur in the very early-stage…

Abstract

Purpose

This paper aims to explore the allocation of the exit value of a start-up company in market equilibrium between an angel investor and an entrepreneur in the very early-stage financing market.

Design/methodology/approach

The theoretical model is established based on the two-sided random search theory and the model’s ability to match the empirical data is evaluated via simulation.

Findings

The model indicates that the allocation of the final investment outcome is not proportional to the initial investments by the angel investor and the entrepreneur. The simulation results show that the continued investment by the entrepreneur and the private benefit acquired by the angel investor have a more profoundly negative influence on the angel investor’s share of the exit value of the start-up company. Moreover, the market search structure represented by the matching probability of an angel investor to an entrepreneur has a more significant impact on the angel investor’s share than the other model parameters.

Originality/value

The importance of market search friction in the very early-stage financing market is emphasized. The concepts of continued investments and private benefits are introduced and quantified for the first time under the framework of angel investment. The impacts of such model parameters as the matching probability of an angel investor to an entrepreneur, the success rate of a start-up company, the bargaining power of an angel investor and the discount rate on the allocation of the exit value of the start-up company are investigated as well.

Details

Studies in Economics and Finance, vol. 38 no. 1
Type: Research Article
ISSN: 1086-7376

Keywords

Book part
Publication date: 26 December 2016

John Y. Lo

Abstract

Details

Angel Financing in Asia Pacific
Type: Book
ISBN: 978-1-78635-128-9

Book part
Publication date: 26 December 2016

John Y. Lo

Abstract

Details

Angel Financing in Asia Pacific
Type: Book
ISBN: 978-1-78635-128-9

Book part
Publication date: 26 August 2019

Kirsi Snellman and Gabriella Cacciotti

The purpose of this chapter is to explore whether and how angel investors’ emotions unfold in the investment opportunity evaluation process as they interact with the social…

Abstract

Purpose

The purpose of this chapter is to explore whether and how angel investors’ emotions unfold in the investment opportunity evaluation process as they interact with the social environment. Complementing recent research that has emphasized the financial calculations, we add angel investors’ own emotional arousal to the list of tools that may help them to rate investment opportunities.

Design/Methodology/Approach

Drawing on semi-structured qualitative interviews, we develop a phenomenological analysis of the investment opportunity evaluation process at the level of angel investors’ lived experience.

Findings

Our findings indicate that when angel investors use their emotional arousal in evaluating investment criteria, they engage in a developmental process characterized by three elements: subjective validation, social validation, and investment decision.

Research Limitations/Implications

We illuminate how discrete emotions can complement rational considerations in the opportunity evaluation journey. Capturing the nature of emotion as action oriented, embodied, socially situated, and distributed, we embrace its adaptive socially situated dynamics.

Practical Implications

Taking a step toward better understanding of the soft aspects in the relationship development that leads to investments, we hope this study will help not only those entrepreneurs who need funding but also those policymakers who design new incentives that improve the flow of investment into promising new ventures.

Originality/Value

We demonstrate how angel investors’ emotions can complement their rational considerations in the investment opportunity evaluation process as they interact with the social environment. Identifying boundary values for the conditions that are necessary and sufficient to advance in the process, we have demonstrated how emotion can serve as a driving or restraining force not only during subjective validation but also during social validation.

Abstract

Details

Angel Financing in Asia Pacific
Type: Book
ISBN: 978-1-78635-128-9

Article
Publication date: 23 October 2023

Alexander (Degreat) Narh Tetteh, Qingxiong (Derek) Weng, Lincoln Jisuvei Sungu and Magdalene Zeinab Akosua Adams

The aim of this study is to understand the levels (i.e. mild vs intense) of task conflict (TC) expressions between angel investors and entrepreneurs at the post-investment stage…

Abstract

Purpose

The aim of this study is to understand the levels (i.e. mild vs intense) of task conflict (TC) expressions between angel investors and entrepreneurs at the post-investment stage and how it affect angel investors’ follow-on investment intentions with the same entrepreneur.

Design/methodology/approach

Survey data was gathered from 71 angel investors in China. Mplus was used to test the proposed research model.

Findings

This study found that angels perceive affective conflict (AC) when engaged in intense TC, unlike the case for mild TC expressions. Furthermore, the analysis shows that, unlike mild TC expressions, intense TC expressions impede angels’ reinvestment intentions when they perceive ACs. Other results indicate that when angels perceive that entrepreneurs are not open to coaching, the prominence of mild TC expression is sharply mitigated and becomes as detrimental as intense TC expressions.

Research limitations/implications

This study only focused on one specific aspect of the angel–entrepreneur post-investment relationship: The effect of their TC expressions on angels’ reinvestment intentions. By no means do the authors imply that TC expression in the angel–entrepreneur post-investment relationship is the only factor that matters to angel investors in their follow-on investment intentions with the same entrepreneur.

Practical implications

The findings suggest that entrepreneurs should pay careful attention to TC that may arise between them and their financiers. TCs are not entirely detrimental, but their negative effect might depend on how they are expressed. An appropriate level of TC may also improve enterprise performance and collaboration. Thus, angels and entrepreneurs should set clear goals and performance standards, where task interactions mainly focus on the goals and expected outcomes.

Originality/value

Prior to this study, little was known about whether all TCs potentially lead to ACs. By distinguishing between levels (i.e. mild vs intense) of TC expressions between angels and entrepreneurs, this study adds a novel aspect to it by showing that TC, in and of itself, does not necessarily lead to AC but can lead to AC once its intensity grows.

Details

International Journal of Conflict Management, vol. 35 no. 2
Type: Research Article
ISSN: 1044-4068

Keywords

Article
Publication date: 20 March 2018

Jesper C. Sort and Christian Nielsen

The purpose of this paper is to investigate how entrepreneurs market their business opportunities towards business angels in the investment process. This is achieved by…

6700

Abstract

Purpose

The purpose of this paper is to investigate how entrepreneurs market their business opportunities towards business angels in the investment process. This is achieved by introducing the business model canvas as a mitigating framework to help entrepreneurs in communicating and structuring the information desired by business angels.

Design/methodology/approach

This paper mobilises a case study approach by following a series of investment processes and investment meetings between entrepreneurs and business angels through 27 semi-structured interviews as well as participant observation and qualitative participant feedback from 13 investment processes.

Findings

The findings illustrate how introducing a framework like the business model canvas helps alleviate the informational and communication challenges between entrepreneurs and business angels. However, some problems occurred when the entrepreneurs and the business angels did not fully agree on the value proposition of the investment opportunity.

Research limitations/implications

The findings show that entrepreneurs who market their business cases to investors obtain better feedback and a higher chance of funding using the business model canvas. Implications of this paper also relate to the preparation of the entrepreneurs and that matchmakers between entrepreneurs and investors can use the business model canvas to facilitate such processes.

Originality/value

This paper contributes to both the theory of the investment process as well as the application of the business model canvas.

Details

Journal of Research in Marketing and Entrepreneurship, vol. 20 no. 1
Type: Research Article
ISSN: 1471-5201

Keywords

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