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First-Round Valuation Of Angel-Backed Companies: The Role Of Investor Human Capital

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Listed:
  • V. COLLEWAERT
  • S. MANIGART
  • -

Abstract

This paper investigates how angel investors’ human capital affects the valuation of their portfolio companies at initial investment, based on the pre-money valuation of 59 investments in young Belgian companies. We show that entrepreneurs are able to negotiate higher valuations with angel investors who have a business degree, more entrepreneurial experience or previous professional law experience. As such, this result is in contrast with the behavior of venture capital investors. Angel investors with financial experience, however, value their investments lower: their financial background leads them to stress the financial side of the deal more.

Suggested Citation

  • V. Collewaert & S. Manigart & -, 2009. "First-Round Valuation Of Angel-Backed Companies: The Role Of Investor Human Capital," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 09/624, Ghent University, Faculty of Economics and Business Administration.
    • Handle: RePEc:rug:rugwps:09/624
    as

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    References listed on IDEAS

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    1. Holtz-Eakin, Douglas & Joulfaian, David & Rosen, Harvey S, 1994. "Sticking It Out: Entrepreneurial Survival and Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 53-75, February.
    2. Mark Van Osnabrugge, 1998. "Do Serial and Non-Serial Investors Behave Differently?: An Empirical and Theoretical Analysis," Entrepreneurship Theory and Practice, , vol. 22(4), pages 23-42, July.
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    More about this item

    Keywords

    risk capital; business angels; angel investors; human capital; valuation;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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