Angel finance: the other venture capital

✍ Scribed by Andrew Wong; Mihir Bhatia; Zachary Freeman

• Publisher: John Wiley and Sons
• Year: 2009
• Tongue: English
• Weight: 100 KB
• Volume: 18
• Category: Article
• ISSN: 1086-1718
• DOI: 10.1002/jsc.849

✦ Synopsis

Abstract

The procurement of capital is an important consideration for an entity transforming from an entrepreneurial idea to a revenue generating company.

Angel financing is one of the most common, but least studied methods, to finance new ventures.

The term “Angel Investor” generally refers to a high net‐worth individual who typically invests in small, private firms on his or her own account.

Using a unique dataset of firms financed by angels between 1994 and 2001, our research provides some insight into the role of angels in funding, monitoring and guiding their investments.

Although exposed to greater uncertainty by investing earlier in the life of a firm compared to venture capital investors, angel investors do not rely on traditional control mechanisms such as board control, staging, or contractual provisions to protect against expropriation.

Angels may use more informal methods of control such as investing in close geographic proximity and syndicating investments with other angels to mitigate risks.

The results of the study indicate that angels have a complementary role to venture capital in the financing of new ventures.

Copyright © 2009 John Wiley & Sons, Ltd.