IDEAS home Printed from https://ideas.repec.org/a/eee/jbvent/v30y2015i6p808-821.html
   My bibliography  Save this article

Angel group members' decision process and rejection criteria: A longitudinal analysis

Author

Listed:
  • Carpentier, Cécile
  • Suret, Jean-Marc

Abstract

This paper investigates business angel group members' decision-making from project submission to the final decision. Using a Canadian group's archival data on 636 proposals, we provide a detailed longitudinal analysis of the decision process. The rejection reasons generally refer to market and execution risk; this finding holds for every step of the process for proposals that pass the pre-screen. Angel group members focus more on market and execution risk than agency risk, similar to venture capitalists. Inexperienced entrepreneurs are rejected for market and product reasons. Decision-making by the studied angel group members differs from that generally described for independent angels.

Suggested Citation

  • Carpentier, Cécile & Suret, Jean-Marc, 2015. "Angel group members' decision process and rejection criteria: A longitudinal analysis," Journal of Business Venturing, Elsevier, vol. 30(6), pages 808-821.
    • Handle: RePEc:eee:jbvent:v:30:y:2015:i:6:p:808-821
    DOI: 10.1016/j.jbusvent.2015.04.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0883902615000294
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbusvent.2015.04.002?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. Peter Kelly, 2007. "Business Angel Research: The Road Traveled and the Journey Ahead," Chapters, in: Hans Landström (ed.), Handbook of Research on Venture Capital, chapter 12, Edward Elgar Publishing.
    2. Zacharakis, Andrew L. & Meyer, G. Dale, 1998. "A lack of insight: do venture capitalists really understand their own decision process?," Journal of Business Venturing, Elsevier, vol. 13(1), pages 57-76, January.
    3. Petty, Jeffrey S. & Gruber, Marc, 2011. ""In pursuit of the real deal": A longitudinal study of VC decision making," Journal of Business Venturing, Elsevier, vol. 26(2), pages 172-188, March.
    4. 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.
    5. Robert A. Baron & Michael D. Ensley, 2006. "Opportunity Recognition as the Detection of Meaningful Patterns: Evidence from Comparisons of Novice and Experienced Entrepreneurs," Management Science, INFORMS, vol. 52(9), pages 1331-1344, September.
    6. Zacharakis, Andrew L. & Meyer, G. Dale, 2000. "The potential of actuarial decision models: Can they improve the venture capital investment decision?," Journal of Business Venturing, Elsevier, vol. 15(4), pages 323-346, July.
    7. Jeffrey E. Sohl, 2007. "The Organization of the Informal Venture Capital Market," Chapters, in: Hans Landström (ed.), Handbook of Research on Venture Capital, chapter 14, Edward Elgar Publishing.
    8. Noe, Thomas H & Rebello, Michael J, 1996. "Asymmetric Information, Managerial Opportunism, Financing, and Payout Policies," Journal of Finance, American Finance Association, vol. 51(2), pages 637-660, June.
    9. Ucbasaran, Deniz & Alsos, Gry Agnete & Westhead, Paul & Wright, Mike, 2008. "Habitual Entrepreneurs," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 4(4), pages 309-450, March.
    10. repec:taf:veecee:v:14:y:2012:i:2-3:p:111-129 is not listed on IDEAS
    11. Lisa Feeney & George H. Haines & Allan L. Riding, 1999. "Private investors' investment criteria: Insights from qualitative data," Venture Capital, Taylor & Francis Journals, vol. 1(2), pages 121-145, April.
    12. repec:bla:jfinan:v:59:y:2004:i:5:p:2177-2210 is not listed on IDEAS
    13. William R. Kerr & Josh Lerner & Antoinette Schoar, 2014. "The Consequences of Entrepreneurial Finance: Evidence from Angel Financings," The Review of Financial Studies, Society for Financial Studies, vol. 27(1), pages 20-55, January.
    14. James O. Fiet, 1995. "Risk Avoidance Strategies In Venture Capital Markets," Journal of Management Studies, Wiley Blackwell, vol. 32(4), pages 551-574, July.
    15. Dan K. Hsu & J. Michael Haynie & Sharon A. Simmons & Alexander McKelvie, 2014. "What matters, matters differently: a conjoint analysis of the decision policies of angel and venture capital investors," Venture Capital, Taylor & Francis Journals, vol. 16(1), pages 1-25, January.
    16. Thomas J. Chemmanur & Zhaohui Chen, 2014. "Venture Capitalists Versus Angels: The Dynamics of Private Firm Financing Contracts," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 3(1-2), pages 39-86.
    17. Dew, Nicholas & Read, Stuart & Sarasvathy, Saras D. & Wiltbank, Robert, 2009. "Effectual versus predictive logics in entrepreneurial decision-making: Differences between experts and novices," Journal of Business Venturing, Elsevier, vol. 24(4), pages 287-309, July.
    18. Hsu, David H., 2007. "Experienced entrepreneurial founders, organizational capital, and venture capital funding," Research Policy, Elsevier, vol. 36(5), pages 722-741, June.
    19. Maxwell, Andrew L. & Jeffrey, Scott A. & Lévesque, Moren, 2011. "Business angel early stage decision making," Journal of Business Venturing, Elsevier, vol. 26(2), pages 212-225, March.
    20. 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.
    21. Dean A. Shepherd & Andrew Zacharakis, 1999. "Conjoint analysis: A new methodological approach for researching the decision policies of venture capitalists," Venture Capital, Taylor & Francis Journals, vol. 1(3), pages 197-217, July.
    22. Malte Brettel, 2003. "Business angels in Germany: A research note," Venture Capital, Taylor & Francis Journals, vol. 5(3), pages 251-268.
    23. Scott Shane & Daniel Cable, 2002. "Network Ties, Reputation, and the Financing of New Ventures," Management Science, INFORMS, vol. 48(3), pages 364-381, March.
    24. Veroniek Collewaert, 2012. "Angel Investors’ and Entrepreneurs’ Intentions to Exit Their Ventures: A Conflict Perspective," Entrepreneurship Theory and Practice, , vol. 36(4), pages 753-779, July.
    25. Lockett, Andy & Murray, Gordon & Wright, Mike, 2002. "Do UK venture capitalists still have a bias against investment in new technology firms," Research Policy, Elsevier, vol. 31(6), pages 1009-1030, August.
    26. Junfu Zhang, 2011. "The advantage of experienced start-up founders in venture capital acquisition: evidence from serial entrepreneurs," Small Business Economics, Springer, vol. 36(2), pages 187-208, February.
    27. Haar, Nancy E. & Starr, Jennifer & MacMillan, Ian C., 1988. "Informal risk capital investors: Investment patterns on the East Coast of the U.S.A," Journal of Business Venturing, Elsevier, vol. 3(1), pages 11-29.
    28. Jeffrey Sohl, 2012. "The changing nature of the angel market," Chapters, in: Hans Landström & Colin Mason (ed.), Handbook of Research on Venture Capital: Volume 2, chapter 2, pages iii-iii, Edward Elgar Publishing.
    29. Heinrich Stedler & Hans Peters, 2003. "Business angels in Germany: An empirical study," Venture Capital, Taylor & Francis Journals, vol. 5(3), pages 269-276.
    30. Mark Van Osnabrugge, 2000. "A comparison of business angel and venture capitalist investment procedures: An agency theory-based analysis," Venture Capital, Taylor & Francis Journals, vol. 2(2), pages 91-109, April.
    31. Cassar, Gavin, 2014. "Industry and startup experience on entrepreneur forecast performance in new firms," Journal of Business Venturing, Elsevier, vol. 29(1), pages 137-151.
    32. Geoff Gregson & Sacha Mann & Richard Harrison, 2013. "Business Angel Syndication and the Evolution of Risk Capital in a Small Market Economy: Evidence from Scotland," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 34(2), pages 95-107, March.
    33. Dean A. Shepherd, 1999. "Venture Capitalists' Assessment of New Venture Survival," Management Science, INFORMS, vol. 45(5), pages 621-632, May.
    34. Prowse, Stephen, 1998. "Angel investors and the market for angel investments," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 785-792, August.
    35. Jonathan D. Arthurs & Lowell W. Busenitz, 2003. "The Boundaries and Limitations of Agency Theory and Stewardship Theory in the Venture Capitalist/Entrepreneur Relationship," Entrepreneurship Theory and Practice, , vol. 28(2), pages 145-162, March.
    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. Lefebvre, Vincent & Certhoux, Gilles & Radu-Lefebvre, Miruna, 2022. "Sustaining trust to cross the Valley of Death: A retrospective study of business angels’ investment and reinvestment decisions," Technovation, Elsevier, vol. 109(C).
    2. 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.
    3. 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.
    4. Wesley II, Curtis L. & Kong, Dejun Tony & Lubojacky, Connor J. & Kim Saxton, M. & Saxton, Todd, 2022. "Will the startup succeed in your eyes? Venture evaluation of resource providers during entrepreneurs' informational signaling," Journal of Business Venturing, Elsevier, vol. 37(5).
    5. Kourosh Shafi, 2021. "Investors’ evaluation criteria in equity crowdfunding," Small Business Economics, Springer, vol. 56(1), pages 3-37, January.
    6. Rafał Morawczyński, 2020. "Venture Capitalists’ Investment Criteria in Poland: Entrepreneurial Opportunities, Entrepreneurs, and Founding Teams," Administrative Sciences, MDPI, vol. 10(4), pages 1-30, October.
    7. Roma, Paolo & Vasi, Maria & Kolympiris, Christos, 2021. "On the signaling effect of reward-based crowdfunding: (When) do later stage venture capitalists rely more on the crowd than their peers?," Research Policy, Elsevier, vol. 50(6).
    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. Cox, Kevin C. & Lortie, Jason & Stewart, Steven A., 2017. "When to pray to the angels for funding: The seasonality of angel investing in new ventures," Journal of Business Venturing Insights, Elsevier, vol. 7(C), pages 68-76.
    10. Hoenig, Daniel & Henkel, Joachim, 2015. "Quality signals? The role of patents, alliances, and team experience in venture capital financing," Research Policy, Elsevier, vol. 44(5), pages 1049-1064.
    11. Bonnet, Christophe & Capizzi, Vincenzo & Cohen, Laurence & Petit, Aurelien & Wirtz, Peter, 2022. "What drives the active involvement in business angel groups? The role of angels' decision-making style, investment-specific human capital and motivations," Journal of Corporate Finance, Elsevier, vol. 77(C).
    12. Berger, Marius & Gottschalk, Sandra, 2021. "Financing and advising early stage startups: The effect of angel investor subsidies," ZEW Discussion Papers 21-069, ZEW - Leibniz Centre for European Economic Research.
    13. Brett Anthony White & John Dumay, 2020. "The angel investment decision: insights from Australian business angels," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(3), pages 3133-3162, September.
    14. Will Drover & Matthew S. Wood & G. Tyge Payne, 2014. "The Effects of Perceived Control on Venture Capitalist Investment Decisions: A Configurational Perspective," Entrepreneurship Theory and Practice, , vol. 38(4), pages 833-861, July.
    15. Vaznyte, Egle & Andries, Petra, 2019. "Entrepreneurial orientation and start-ups' external financing," Journal of Business Venturing, Elsevier, vol. 34(3), pages 439-458.
    16. Antretter, Torben & Sirén, Charlotta & Grichnik, Dietmar & Wincent, Joakim, 2020. "Should business angels diversify their investment portfolios to achieve higher performance? The role of knowledge access through co-investment networks," Journal of Business Venturing, Elsevier, vol. 35(5).
    17. Veroniek Collewaert & Harry J. Sapienza, 2016. "How Does Angel Investor–Entrepreneur Conflict Affect Venture Innovation? It Depends," Entrepreneurship Theory and Practice, , vol. 40(3), pages 573-597, May.
    18. Junfu Zhang, 2011. "The advantage of experienced start-up founders in venture capital acquisition: evidence from serial entrepreneurs," Small Business Economics, Springer, vol. 36(2), pages 187-208, February.
    19. Berger, Marius & Hottenrott, Hanna, 2021. "Start-up subsidies and the sources of venture capital," Journal of Business Venturing Insights, Elsevier, vol. 16(C).
    20. Lien, Wan-Chien & Chen, Jianhong & Sohl, Jeffrey, 2022. "Do I have a big ego? Angel investors' narcissism and investment behaviors," Journal of Business Venturing, Elsevier, vol. 37(5).

    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:eee:jbvent:v:30:y:2015:i:6:p:808-821. 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbusvent .

    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.