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The angels’ share hypothesis in new firms

Author

Listed:
  • Ikenna Uzuegbunam

    (Howard University)

  • Brandon Ofem

    (University of Missouri-St. Louis)

  • Joe Fox

    (University of Akron)

  • Satish Nambisan

    (Case Western Reserve University)

Abstract

We investigate the impact of the angels’ share—the angel investors’ proportion of ownership—on entrepreneurial performance. We argue that below the blockholder level of ownership, the angels’ share is associated with greater innovation but lower market performance. In contrast, we predict that above the blockholder level of ownership, the angels’ share is associated with lower innovation but higher market performance. We test this proposition across two independent samples of US-based ventures. In study 1, we analyzed data from the Kauffman Firm Survey (KFS, 2004–2011) to substantiate the angels’ share hypothesis. Moreover, we show how angels’ share and family investors interact in new ventures. In study 2, we analyzed data from the Entrepreneurship Database Program (EDP, 2013–2018) to check the robustness of the angels’ share hypothesis. Both studies point to the importance of ownership thresholds in predicting angel investor activism in the strategy of new ventures.

Suggested Citation

  • 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.
    • Handle: RePEc:kap:sbusec:v:61:y:2023:i:2:d:10.1007_s11187-022-00695-6
    DOI: 10.1007/s11187-022-00695-6
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    More about this item

    Keywords

    Angel investors; Family investors; Innovation; Market performance; Ownership structure;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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