Decision time in Belgium: an experiment as to how business angels evaluate investment opportunities

To what extent do business angels really understand their own decision process? This paper is the first in business angel research literature to use conjoint analysis to capture decision makers’ actual decision policies and to compare these results with their stated decision policies. Although more than twenty papers discussing the decision criteria of business angels have been published, most of these studies rely on post hoc methodologies (e.g. interviews and surveys) to capture the decision process. Post hoc methods assume that business angels can accurately introspect about their own decision processes, but studies from cognitive psychology suggest that decision makers are poor at introspecting. In addition, experiments in the venture capital industry have shown that venture capitalists are poor at introspecting and do not fully understand their decision processes. Taking cues from cognitive psychology, this paper starts with the hypothesis that, like venture capitalists, business angels do not fully understand their own decision processes. To test this hypothesis, an experiment including twenty-four Belgian business angels and using conjoint analysis is performed. The findings suggest that business angels are not good at introspecting about their own decision processes. Even within the confines of a controlled experiment, which greatly reduces the amount of information considered, business angels lacked strong understanding of how they made decisions.