Room W148, Williams Building, Middlesex University, The Burroughs, Hendon, London NW4 4BT
In the USA, evidence suggests that business angels (BA) fund 15 to 20 times as many companies as venture capitalists. Hence, understanding their investment decisions is extremely relevant. However, this is not a straightforward task, since the BA population is not homogenous. This limitation has not been acknowledged in many prior studies of BA investment decision making. The research is based on the data collected from an online survey of UK angel investors that collected a total of 472 investment decisions made by 238 BAs. A two-step cluster analysis procedure was conducted.
The data allow us to clearly identify three different clusters. The first is a cluster where all the seven factors were given similar emphasis in the investment decisions. The second is a group of investments were the angels took account of a subset (five out of seven) of the factors to make their investment decision. The third cluster consisted of investment decisions where the investor took into account just two factors, with the remaining five factors regarded as unimportant.
Post hoc tests identify statistical differences between groups in terms of levels of innovation, industry and stage of the business, and with the sources of due diligence used by BA. Clear links between the level of investment experience and how well investors can discriminate the investment criteria used are drawn. This study also shows to what extend the influence of others (gatekeepers, lead investors and other angels) impacts the reasons to invest.
This study helps scholars to better understand the homogeneity of the BA population and the way they make decisions. The use of community, of practice as a theoretical framework is suggested to explain some of the behaviours of BA investors. Entrepreneurs and policy makers should acknowledge that there is no correct "formula" to getting angel investment.
Tiago Botelho joined Norwich Business School as a Lecturer in Business Strategy in August 2015. Prior to joining NBS, he held teaching positions (lecturer, teaching assistant, and tutor) at the University of Glasgow, University of Strathclyde, Universidade Nova de Lisboa, and Piaget Institute. He holds a BA degree in Economics from the Universidade Autónoma de Lisboa (Lisbon, Portugal) and an MA degree in Finance and Business Economics from Fundação Getúlio Vargas, Escola de Pós-Graduação em Economia (Rio de Janeiro, Brazil). He has completed two postgraduate certificates: a Research Masters in Economics, Universidade Nova de Lisboa, and a Research Methodology for Business and Management, University of Strathclyde. Currently, he is completing a PhD in Management at the University of Glasgow on the topic of business angel investing.
All welcome – postgraduate and PhD students are particularly encouraged to attend. Refreshments will be provided – to confirm a place please notify Pamela Macaulay.