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Angel network affiliation and business angels' investment practices

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  • Bonini, Stefano
  • Capizzi, Vincenzo
  • Valletta, Mario
  • Zocchi, Paola

Abstract

This paper provides preliminary evidence on the effects of membership in a business angel network (BAN) on the investment decisions of the members. Using a novel dataset containing qualitative and quantitative information on 810 angel or angel-group backed investments in 619 companies by 330 unique business angels from 2008 to 2014, we show that BAN membership generates valuable information, networking, monitoring, and risk reduction effects, which ultimately affect the share of personal wealth committed by each angel investor and their equity stake in the targeted company. These results extend our knowledge of the investment behavior and characteristics of business angels, a relatively opaque funding source that is rapidly gaining prominence in support of new ventures and the development of the global economy.

Suggested Citation

  • Bonini, Stefano & Capizzi, Vincenzo & Valletta, Mario & Zocchi, Paola, 2018. "Angel network affiliation and business angels' investment practices," Journal of Corporate Finance, Elsevier, vol. 50(C), pages 592-608.
    • Handle: RePEc:eee:corfin:v:50:y:2018:i:c:p:592-608
    DOI: 10.1016/j.jcorpfin.2017.12.029
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    2. 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).
    3. Block, Joern H. & Hirschmann, Mirko & Fisch, Christian, 2021. "Which criteria matter when impact investors screen social enterprises?," Journal of Corporate Finance, Elsevier, vol. 66(C).
    4. Peter Wirtz & Christophe Bonnet & Laurence Cohen & Christophe Haon, 2020. "Investing Human Capital: Angel Cognition and Active Involvement in Business Angel Groups," Grenoble Ecole de Management (Post-Print) halshs-02374570, HAL.
    5. Cumming, Douglas & Groh, Alexander Peter, 2018. "Entrepreneurial finance: Unifying themes and future directions," Journal of Corporate Finance, Elsevier, vol. 50(C), pages 538-555.
    6. Maran, Raluca, 2022. "Improving MSMEs’ access to start-up financing in ASEAN countries," MPRA Paper 114501, University Library of Munich, Germany.
    7. Bonini, Stefano & Capizzi, Vincenzo & Zocchi, Paola, 2019. "The performance of angel-backed companies," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 328-345.
    8. Julien Salin & Nadine Levratto, 2020. "Are business angel-backed companies truly different? a comparative analysis of the financial structure," EconomiX Working Papers 2020-5, University of Paris Nanterre, EconomiX.
    9. Laurence Cohen & Kirsten Burkhardt, 2019. "Entrepreneurs (novices vs. experts) and investors: Interaction and rationality dynamics (effectual vs. causal) [Entrepreneurs (novice vs. expert) et investisseurs : interactions et dynamique des ra," Post-Print hal-02177388, HAL.
    10. Ikenna Uzuegbunam & Brandon Ofem & Joe Fox & Satish Nambisan, 2023. "The angels’ share hypothesis in new firms," Small Business Economics, Springer, vol. 61(2), pages 843-865, August.
    11. Gvetadze, Salome & Pal, Kristian & Torfs, Wouter, 2020. "The business angel portfolio under the European Angels Fund: An empirical analysis," EIF Working Paper Series 2020/62, European Investment Fund (EIF).
    12. Harrison, Richard T. & Bock, Adam J. & Gregson, Geoff, 2020. "Stairway to heaven? rethinking angel investment policy and practice," Journal of Business Venturing Insights, Elsevier, vol. 14(C).
    13. Wesemann, Henrik & Antretter, Torben, 2023. "Why don’t you like me? Exploring the social venture funding gap in angel investing," Journal of Business Venturing Insights, Elsevier, vol. 20(C).
    14. 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).
    15. 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).
    16. Croce, Annalisa & Schwienbacher, Armin & Ughetto, Elisa, 2023. "Internationalization of business angel investments: The role of investor experience," International Business Review, Elsevier, vol. 32(1).
    17. Marc Cowling & Ross Brown & Neil Lee, 2021. "The geography of business angel investments in the UK: Does local bias (still) matter?," Environment and Planning A, , vol. 53(5), pages 1180-1200, August.
    18. 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.
    19. Butticè, Vincenzo & Croce, Annalisa & Ughetto, Elisa, 2021. "Network dynamics in business angel group investment decisions," Journal of Corporate Finance, Elsevier, vol. 66(C).
    20. Marek Zinecker & Martina Skalicka & Adam P. Balcerzak & Michał Bernard Pietrzak, 2022. "Identifying the impact of external environment on business angel activity," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 35(1), pages 83-105, December.
    21. 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.
    22. Andrea Bellucci & Gianluca Gucciardi & Rossella Locatelli & Cristiana Schena, 2022. "Gender Gap in Business Angel financing," Mo.Fi.R. Working Papers 175, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    23. Laurence Cohen & Peter Wirtz, 2018. "Caractéristiques des entrepreneurs, finance entrepreneuriale et trajectoires de croissance," Working Papers hal-01723858, HAL.

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    More about this item

    Keywords

    Business angels; Business angel networks; Venture capital;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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