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Angel Investors: Early Firm Owners

In: Shareholder Empowerment

Author

Listed:
  • John Berns
  • Karen Schnatterly

Abstract

Angel investors are often the first outside investors in a firm (Wetzel, 1983). Given the history of the firm prior to their financing—that is, virtually new and unknown—their decision to provide funding for the entrepreneurial venture poses quite an investment risk (Mason & Harrison, 2002). Ventures perceived to be less risky while still offering an acceptable return on investment are more likely to receive financing (Ganzach, 2000; Lange, Leleux, & Surlemont, 2003; Tyebjee & Bruno, 1984). Certain firm and angel characteristics influence the angel’s perception of the investment and decision to participate (Galbraith, De Noble, & Ehrlich, 2009). Once involved as part-owners, the angels themselves can have a strong influence on the firm and its functioning (Prowse, 1998). Provided that the firm survives and moves more closely to an investor exit (e.g., initial public offering [IPO] or buyout), the angels also play a role with regard to the next-stage owners.

Suggested Citation

  • John Berns & Karen Schnatterly, 2015. "Angel Investors: Early Firm Owners," Palgrave Macmillan Books, in: Maria Goranova & Lori Verstegen Ryan (ed.), Shareholder Empowerment, chapter 0, pages 223-238, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-37393-9_10
    DOI: 10.1057/9781137373939_10
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