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Research on Venture Capitalists’ and Business Angels’ Investment Criteria: A Systematic Literature Review

In: Contemporary Developments in Entrepreneurial Finance

Author

Listed:
  • Christian Granz

    (Heinrich Heine University Düsseldorf)

  • Marisa Henn

    (Heinrich Heine University Düsseldorf)

  • Eva Lutz

    (Heinrich Heine University Düsseldorf)

Abstract

This systematic literature review of 54 articles investigates quantitative and qualitative studies published between 1974 and 2017 in terms of differences in investment criteria between venture capitalists (VCs) and business angels (BAs). Research has shown a persistent interest in examining VCs’ and BAs’ investment criteria; however, inconsistent findings demonstrate the need for a review of the aggregate extant knowledge. We clarify what is known about the controversial debate on VCs’ and BAs’ investment criteria and shed light on key issues that can lead to a better understanding of why VCs and BAs focus on certain investment criteria. To achieve these objectives, we develop a conceptual framework grounded on agency theory for investment criteria that VCs and BAs use for funding decisions. Our review reveals that VCs in the first instance focus on the business and financial traction, whereas BAs initially employ investment criteria related to the management team. These differences between VCs’ and BAs’ investment decision policies support the agency view. In addition, we propose a detailed path for future research and provide entrepreneurs with practical implications.

Suggested Citation

  • Christian Granz & Marisa Henn & Eva Lutz, 2020. "Research on Venture Capitalists’ and Business Angels’ Investment Criteria: A Systematic Literature Review," FGF Studies in Small Business and Entrepreneurship, in: Alexandra Moritz & Joern H. Block & Stephan Golla & Arndt Werner (ed.), Contemporary Developments in Entrepreneurial Finance, pages 105-136, Springer.
    • Handle: RePEc:spr:fgfchp:978-3-030-17612-9_5
    DOI: 10.1007/978-3-030-17612-9_5
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