Business angels (BAs) are high-net worth individuals, who invest their own money in promising start-up firms, in exchange for ownership equity, acting on a stand-alone basis or through semiformal networks. Their operations often complement that of venture capitalists (VCs), who are intermediaries specialized in private equity. Our study seeks to address three questions recently posed by prominent researchers. First: the construction of high-quality samples of angel investments. Second: the geography of BAs’ investment activity and the role of BAs in filling the equity gap. Third: the relationship between angels and venture capitalists. Using a dataset of 2,353 venture financing deals we propose an empirical analysis to test the following hypotheses: the size of the preferred deals; the life stage of the selected enterprises; their operating sector; the preferred geographical area; the willingness to work with VCs. We use three important databases: MarketLine Advantage (the first), CrunchBase (the second) and Zephyr (to replace missing data). Unfortunately, studies on the subject are numerous and often fragmentary. They often focus on single territorial realities or on single local problems. They do not analyze the global phenomenon in a clear and unique way. Our contribution to the extant literature is therefore threefold. First: we construct a high-quality sample of global angel investments. Second: we delve into the investment strategies of BAs in terms of funding stages, rationales, target industries and geographic regions. Third: we examine the use of the co-investment mode between BAs and VCs.
(Business) Angels Falling on Earth: What We Have Learned About Their Investment Strategies
Rovera, C.
2023-01-01
Abstract
Business angels (BAs) are high-net worth individuals, who invest their own money in promising start-up firms, in exchange for ownership equity, acting on a stand-alone basis or through semiformal networks. Their operations often complement that of venture capitalists (VCs), who are intermediaries specialized in private equity. Our study seeks to address three questions recently posed by prominent researchers. First: the construction of high-quality samples of angel investments. Second: the geography of BAs’ investment activity and the role of BAs in filling the equity gap. Third: the relationship between angels and venture capitalists. Using a dataset of 2,353 venture financing deals we propose an empirical analysis to test the following hypotheses: the size of the preferred deals; the life stage of the selected enterprises; their operating sector; the preferred geographical area; the willingness to work with VCs. We use three important databases: MarketLine Advantage (the first), CrunchBase (the second) and Zephyr (to replace missing data). Unfortunately, studies on the subject are numerous and often fragmentary. They often focus on single territorial realities or on single local problems. They do not analyze the global phenomenon in a clear and unique way. Our contribution to the extant literature is therefore threefold. First: we construct a high-quality sample of global angel investments. Second: we delve into the investment strategies of BAs in terms of funding stages, rationales, target industries and geographic regions. Third: we examine the use of the co-investment mode between BAs and VCs.
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