IDEAS home Printed from https://ideas.repec.org/a/prg/jnloce/v17y2024i2id294p3-26.html
   My bibliography  Save this article

Angel investor decision-making about investing in a startup: The key role of founder characteristics
[Rozhodování angel investora o investici do start-upu: Klíčová role charakteristik zakladatelů]

Author

Listed:
  • Vít Paclík
  • Pavel Svačina

Abstract

Does an early-stage startup have future potential or not? This is a question that many investors or start-up appraisers ask themselves. A qualified answer to this question can be obtained by learning how and why experienced business angel investors, who are those who invest substantial sums in early-stage start-ups, make empirical decisions. In this article, we identify the key signals that are decisive for Mr. Jiří Hlavenka, a experienced Czech angel investor in IT sector with a history of more than 50 invested start-ups and several thousand analyzed investment opportunities. The results show that the angel investor's decision is primarily a "bet on people" - his decision to invest in an early-stage start-up is most influenced by the specific set of skills and abilities of the founder(s), namely: (i) the ability to execute a business, (ii) being a good leader, (iii) being a good merchant, (iv) ability to build a team, (v) all-round versatility, (vi) carrying a strong vision. The findings of this article may be of interest, among other things, to appraisers, investors who estimate the future potential of new start-ups, or start-up founders who use the investments themselves in the early stages of their business.

Suggested Citation

  • Vít Paclík & Pavel Svačina, 2024. "Angel investor decision-making about investing in a startup: The key role of founder characteristics [Rozhodování angel investora o investici do start-upu: Klíčová role charakteristik zakladatelů]," Oceňování, Prague University of Economics and Business, vol. 17(2), pages 3-26.
    • Handle: RePEc:prg:jnloce:v:17:y:2024:i:2:id:294:p:3-26
    DOI: 10.18267/j.ocenovani.294
    as

    Download full text from publisher

    File URL: http://ocenovani.vse.cz/doi/10.18267/j.ocenovani.294.html
    Download Restriction: free of charge
    File URL: http://ocenovani.vse.cz/doi/10.18267/j.ocenovani.294.pdf
    Download Restriction: free of charge
    File URL: https://libkey.io/10.18267/j.ocenovani.294?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Himawat Aryadita & Badri Munir Sukoco & Maurice Lyver, 2023. "Founders and the success of start-ups: An integrative review," Cogent Business & Management, Taylor & Francis Journals, vol. 10(3), pages 2284451-228, December.
    2. Holger Patzelt & Rebecca Preller & Nicola Breugst, 2021. "Understanding the Life Cycles of Entrepreneurial Teams and Their Ventures: An Agenda for Future Research," Entrepreneurship Theory and Practice, , vol. 45(5), pages 1119-1153, September.
    3. Colin Clark, 2008. "The impact of entrepreneurs' oral ‘pitch’ presentation skills on business angels' initial screening investment decisions," Venture Capital, Taylor & Francis Journals, vol. 10(3), pages 257-279, April.
    4. Muzyka, Dan & Birley, Sue & Leleux, Benoit, 1996. "Trade-offs in the investment decisons of European venture capitalists," Journal of Business Venturing, Elsevier, vol. 11(4), pages 273-287, July.
    5. Magnus Henrekson & Tino Sanandaji, 2018. "Stock option taxation and venture capital activity: a cross-country study," Venture Capital, Taylor & Francis Journals, vol. 20(1), pages 51-71, January.
    6. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    7. Gimmon, Eli & Levie, Jonathan, 2010. "Founder's human capital, external investment, and the survival of new high-technology ventures," Research Policy, Elsevier, vol. 39(9), pages 1214-1226, November.
    8. C. Mirjam van Praag, 2003. "Business Survival and Success of Young Small Business Owners," Small Business Economics, Springer, vol. 21(1), pages 1-17, August.
    9. Frédéric Delmar & Scott Shane, 2006. "Does Experience Matter? The Effect of Founding Team Experience on the Survival and Sales of Newly Founded Ventures," Post-Print hal-02311638, HAL.
    10. Cheryl R. Mitteness & Melissa S. Baucus & Richard Sudek, 2012. "Horse vs. Jockey? How stage of funding process and industry experience affect the evaluations of angel investors," Venture Capital, Taylor & Francis Journals, vol. 14(4), pages 241-267, October.
    11. David Kirsch & Brent Goldfarb & Azi Gera, 2009. "Form or substance: the role of business plans in venture capital decision making," Strategic Management Journal, Wiley Blackwell, vol. 30(5), pages 487-515, May.
    12. Baumgartner, Michael & Ambühl, Mathias, 2020. "Causal modeling with multi-value and fuzzy-set Coincidence Analysis," Political Science Research and Methods, Cambridge University Press, vol. 8(3), pages 526-542, July.
    13. Shane, Scott & Drover, Will & Clingingsmith, David & Cerf, Moran, 2020. "Founder passion, neural engagement and informal investor interest in startup pitches: An fMRI study," Journal of Business Venturing, Elsevier, vol. 35(4).
    14. Guy Ben-Ari & Nicholas S Vonortas, 2007. "Risk financing for knowledge-based enterprises: Mechanisms and policy options," Science and Public Policy, Oxford University Press, vol. 34(7), pages 475-488, August.
    15. Gerring, John, 2004. "What Is a Case Study and What Is It Good for?," American Political Science Review, Cambridge University Press, vol. 98(2), pages 341-354, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alexandra Moritz & Walter Diegel & Joern Block & Christian Fisch, 2022. "VC investors’ venture screening: the role of the decision maker’s education and experience," Journal of Business Economics, Springer, vol. 92(1), pages 27-63, January.
    2. Clingingsmith, David & Shane, Scott, 2017. "Training Aspiring Entrepreneurs to Pitch Experienced Investors: Evidence from a Field Experiment in the United States," SocArXiv yzpvf, Center for Open Science.
    3. repec:wsi:acsxxx:v:21:y:2019:i:08:n:s1363919619500105 is not listed on IDEAS
    4. Dohyeon Kim & Su Yong Lee, 2022. "When venture capitalists are attracted by the experienced," Journal of Innovation and Entrepreneurship, Springer, vol. 11(1), pages 1-18, December.
    5. Kaiser, Ulrich & Kuhn, Johan M., 2020. "The value of publicly available, textual and non-textual information for startup performance prediction," Journal of Business Venturing Insights, Elsevier, vol. 14(C).
    6. Da Teng & Chengchun Li & Sailesh Tanna, 2022. "Foreign ownership and productivity in Chinese newly listed firms: the moderating roles of founder’s human capital and social ties," Asia Pacific Journal of Management, Springer, vol. 39(3), pages 1125-1159, September.
    7. Giraudo, Emanuele & Giudici, Giancarlo & Grilli, Luca, 2019. "Entrepreneurship policy and the financing of young innovative companies: Evidence from the Italian Startup Act," Research Policy, Elsevier, vol. 48(9), pages 1-1.
    8. Melissa S. Cardon & Cheryl Mitteness & Richard Sudek, 2017. "Motivational Cues and Angel Investing: Interactions among Enthusiasm, Preparedness, and Commitment," Entrepreneurship Theory and Practice, , vol. 41(6), pages 1057-1085, November.
    9. Ko, Eun-Jeong & McKelvie, Alexander, 2018. "Signaling for more money: The roles of founders' human capital and investor prominence in resource acquisition across different stages of firm development," Journal of Business Venturing, Elsevier, vol. 33(4), pages 438-454.
    10. Diana Hechavarría & Charles Matthews & Paul Reynolds, 2016. "Does start-up financing influence start-up speed? Evidence from the panel study of entrepreneurial dynamics," Small Business Economics, Springer, vol. 46(1), pages 137-167, January.
    11. Krukowski, Kipp A. & Pollack, Jeffrey M. & Rutherford, Matthew W., 2023. "Winning the opportunity to pitch: Piquing startup investors’ interest by sending the right signals in executive summaries," Business Horizons, Elsevier, vol. 66(1), pages 75-86.
    12. Boudreaux, Christopher, 2019. "Do private enterprises outperform state enterprises in an emerging market? The importance of institutional context in entrepreneurship," MPRA Paper 93039, University Library of Munich, Germany.
    13. Mayer-Haug, Katrin & Read, Stuart & Brinckmann, Jan & Dew, Nicholas & Grichnik, Dietmar, 2013. "Entrepreneurial talent and venture performance: A meta-analytic investigation of SMEs," Research Policy, Elsevier, vol. 42(6), pages 1251-1273.
    14. Tali Hadasa Blank & Abraham Carmeli, 2021. "Does founding team composition influence external investment? The role of founding team prior experience and founder CEO," The Journal of Technology Transfer, Springer, vol. 46(6), pages 1869-1888, December.
    15. Evila Piva & Cristina Rossi-Lamastra, 2018. "Human capital signals and entrepreneurs’ success in equity crowdfunding," Small Business Economics, Springer, vol. 51(3), pages 667-686, October.
    16. Welter, Chris & Holcomb, Tim R. & McIlwraith, John, 2023. "The inefficiencies of venture capital funding," Journal of Business Venturing Insights, Elsevier, vol. 19(C).
    17. David B. Audretsch & Erik E. Lehmann, 2013. "Corporate governance in newly listed companies," Chapters, in: Mario Levis & Silvio Vismara (ed.), Handbook of Research on IPOs, chapter 9, pages 179-206, Edward Elgar Publishing.
    18. Jana Drechsler & Jan-Thomas Bachmann & Andreas Engelen, 2019. "The effect of immigrants in the founding team on the international attention of new ventures," Journal of International Entrepreneurship, Springer, vol. 17(3), pages 305-333, September.
    19. Nigam, Nirjhar & Benetti, Cristiane & Johan, Sofia A., 2020. "Digital start-up access to venture capital financing: What signals quality?," Emerging Markets Review, Elsevier, vol. 45(C).
    20. Manuel Kaiser & Andreas Kuckertz, 2024. "Bibliometrically mapping the research field of entrepreneurial communication: where we stand and where we need to go," Management Review Quarterly, Springer, vol. 74(4), pages 2087-2120, December.
    21. Mojca Svetek, 2023. "The Role of Entrepreneurs’ Perceived Competence and Cooperativeness in Early-Stage Financing," Entrepreneurship Theory and Practice, , vol. 47(6), pages 2047-2076, November.

    More about this item

    Keywords

    Business angel; Angel investor; Start-up success; Start-up founder; Valuation of start-ups; Úspěch start-upu; Zakladatel start-upu; Oceňování start-upů;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:prg:jnloce:v:17:y:2024:i:2:id:294:p:3-26. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Stanislav Vojir (email available below). General contact details of provider: https://edirc.repec.org/data/uevsecz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.