The history of Silicon Valley and other successful entrepreneurship networks suggests that the potential of business angel activity is often untapped in entrepreneurship policy circles. If successful entrepreneurs can be convinced to re-invest their success, the resulting relationships are often more fruitful than any advisory relationship that a VC can have with its portfolio companies.
There has been no shortage of quantitative research done on how angel investors make their decisions. Now a group of researchers at Lund University used a different approach, and conducted in-depth interviews with five experienced business angels to get a deeper understanding of their decision making process.
Here is what they found.
- Business angels are not a homogenous group. They differ by their former careers, gender, and age, all of which influences their approach to decision making.
- Corporate careers and entrepreneurial experience are the most valuable resource when angel investors begin their investing careers. These types of backgrounds are linked to financial preparedness and the size of the investors’ networks, which creates value for the portfolio companies. These careers also help investors understand the entrepreneurial process more.
- Corporate careers and entrepreneurial experience remain an important source of knowledge even as angel investors become more experienced. In fact, the authors suggest that even later on, business angels rely less on their investment expertise and more on their expertise in entrepreneurship and corporate management if they can.
To access the original paper by Tim Schulz and Jan-Niklas Schmücker, please click here.
Contributed by Lili Torok.