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Sélectionner, contrôler et accompagner : le credo du Business Angel pour réduire le risque de l'entreprise
Abstract
Cet article propose de discuter dans quelle mesure l’accompagnement des Business Angels contribue à une réduction des risques d’échec des entrepreneurs. Des éléments d’explication de l’impact de cet accompagnement sont fournis à partir d’une enquête qualitative réalisée auprès de 10 couples Entrepreneur-Business Angel via des entretiens semi-directifs. Cette étude a été conduite principalement dans deux régions françaises : Île-de-France et Provence-Alpes-Côte d’Azur. Réalisée entre octobre 2015 et février 2016, cette étude met en relief les motivations et les ressorts de la relation entre les porteurs de projets et les financeurs accompagnateurs. Elle identifie, à partir de verbatim des situations types qui permettent de comprendre les différences observées entre les entreprises accompagnées ; d’identifier les points forts et les éventuelles faiblesses du dispositif de financement et d’accompagnement. Il s’agit de mettre en évidence l’apport d’un type particulier d’apporteurs de capitaux, à savoir les Business Angels, dans la sécurisation du parcours des entreprises et de montrer comment leur engagement dans le financement et l’accompagnement d’une entreprise permet de réduire le risque d’échec.
... Finally, implementation risk comes from the complexity of the undertaking and the possibility that the business model, product, service, or technology will not be successfully executed (Kaplan and Strömberg, 2004 Investors can control such risks ex-ante, that is, before investing, by rigorously selecting the investment opportunity. They may also manage risk ex-post, that is, post-investment, by getting involved in the ventures' management and conducting rigorous monitoring (Carpentier and Suret, 2015;Fiet, 1995;Tessier and Ramadan, 2020;Van Osnabrugge, 2000). This article focuses on the practices used by investors ex-ante to control risks. ...
... VCs either wait for deals to come to them (Feeney et al., 1999;Fried and Hisrich, 1994;Polzin et al., 2018) based on their reputation, or draw heavily from their network of syndicate partners to harness co-investment opportunities (Awounou-N'dri and Boufaden, 2020; Dimov and Milanov, 2010;Hochberg, Ljungqvist, and Lu, 2007;Teten and Farmer, 2010). BAs generally source deals by relying on personal contacts and referrals from business associates (Bonnet, Wirtz, and Haon, 2013;Paul, Whittam, and Wyper, 2007;Tessier and Ramadan, 2020). Concerning accelerators, the extant literature describes an open call for applications, i.e., a public announcement coupled with an online form to be filled out, as the source of candidates (Cohen, 2013;Pauwels et al., 2016;Wright and Drori, 2018). ...
... By contrast, BAs' assessment tends to be more informal and involves a less exhaustive evaluation (Hsu, Haynie, Simmons, and McKelvie, 2014;Mitteness et al., 2012;Van Osnabrugge, 2000). They usually focus more on evaluating the entrepreneurial team, using their previous experience and intuition (Tessier and Ramadan, 2020;Van Osnabrugge, 2000). They focus on reducing agency risk because information asymmetries are more prevalent in the early stages of the venture lifecycle when BAs tend to invest. ...
Corporate-sponsored accelerators have become an important source of support for entrepreneurial ventures, especially in Europe. One of their key challenges is selecting adequate ventures to support. We study in depth corporate accelerators’ selection process through a qualitative approach based on 34 interviews from seven accelerators in France and Germany. Our analysis identifies distinct practices and specific patterns in their selection process. By mobilizing agency theory, we propose theoretical explanations as to why specific selection approaches favor particular goals, whether co-development of innovations, financial upside, or diffusion of technology platforms. We contribute to extending entrepreneurial support and entrepreneurial finance literatures
Résumé
En utilisant les données individuelles de 30 329 ex-entrepreneurs 1 provenant de la base de données du GEM entre 2007 et 2013, nous avons testé l’impact des raisons de sortie volontaires et involontaires ainsi que d’autres déterminants (les capitaux humain et social ainsi que la peur de l’échec) sur l’intention de recréer après une sortie d’entreprise. Nos résultats montrent que, contrairement aux individus ayant cessé volontairement leurs activités, les individus (issus des pays membres de l’OCDE) ayant quitté involontairement leur entreprise précédente sont plus susceptibles de retenter leur chance. Ils peuvent percevoir cette expérience comme un premier essai, grâce auquel ils ont acquis des connaissances qu’ils pourront utiliser dans une prochaine entreprise.
This paper attempts to shed light on the nexus of relationships existing between failure, bankruptcy, institutional context, and local characteristics on one hand and entrepreneurship, firm survival, and performance on the other. The aim is to provide a larger vantage point from which to read the research included in this issue with the overall ambition to contribute to a better understanding of our entrepreneurial societies and the role of failure within markets. In this respect, the focus here is mainly on the institutions governing the bankruptcy procedures which do much more than simply regulating the exit of insolvent firms and protecting creditors’ investments, minimizing the social cost of failures. They set up the revolving doors through which creditors can reinvest the recovered capital in new entrepreneurial projects and failed entrepreneurs can bring back to the market their skills and their entrepreneurial spirit for fostering new and hopefully successful ventures. Therefore, by managing bankruptcy, the institutions are not only protecting the economy. Instead, they have become a tool of economic policy, devoted to the delicate issue of regulating a physiological event to the market while avoiding too much waste of resources. In a more positive perspective, managing insolvency and failure is also a mean to strengthen competitiveness and growth, making it possible to stimulate the market in reshuffling skills and resources into new activities. A deeper understanding can in turn contribute to the implementation of better and more efficient policies by integrating bankruptcy as a natural component of firm and market life.
An increasingly important external control mechanism affecting the governance of young and fast growing companies worldwide is the emergence of institutional and private equity investors, as equity owners. Institutional investors have the potential to influence management’s activities directly through their ownership, and indirectly by trading their shares (Gillan and Starks, 2003). As a result, companies backed by private equity investors represent a fruitful environment to investigate the use and efficiency of a multitude of control mechanisms. However the surge over the last 30 years in investment activity by private equity investors at large, has given rise to an increased specialization that nowadays profoundly distinguishes business angels from venture capitalists and buyout specialists. While these investors share common traits such as a value maximization approach, risk-return informed decisions, and a finite investment horizon, the monitoring and control mechanisms associated with their stage focus and consequent risk-return profile are substantially different. In this paper we aim at presenting an up-to-date review of the main theoretical contributions and empirical results in this active and growing field of research.
Abstract
Purpose – The purpose of this paper is to focus on the processes that occur between entrepreneurs’ primary attribution for failure and the emergent learning dimensions from failure, in the context of regenerative failures.
Design/methodology/approach – The study focusses on 21 entrepreneurs operating in the producing services sector, a major subsector of the Irish Information and Communication Technology industry. All the entrepreneurs experienced business failure and subsequently re-entered the entrepreneurial sphere at a later date. A qualitative approach examines their attributions for failure, responses to failure, and learning dimensions from failure.
Findings – Regenerative entrepreneurs’ primary attributions for business failure are examined in detail; four types of failure attributions are uncovered – internal individual level; external firm level; external market level; and hybrid attributions. Entrepreneurs’ attributions impact their responses to the failure; this in turn affects entrepreneurial learning. When failure is primarily attributed to internal factors, the entrepreneur’s response is affective, leading to deep, personal learning about oneself. External attributions (both firm level and market level) result in a primarily behavioural response, with learning focussed on the venture, and networks and relationships. Those primarily attributing failure to hybrid factors have a largely cognitive response and they learn about venture management.
Research limitations/implications – This study is a retrospective analysis of business failure.
Originality/value – The study contributes to the growing literature on entrepreneurs’ attributions for business failure by focussing on regenerative failure; it links attributions to – responses to, and learning from, failure. The key contribution to knowledge emerges from the development of a model of the underlying processes affecting learning from failure for regenerative entrepreneurs. The research also establishes and identifies clear links between attributions, responses, and lessons learned in the context of regenerative failure.
Keywords Start-ups, Business failure, Attribution theory, Entrepreneurial learning, Hybrid attributions, Regenerative failure
Paper type Research paper
This paper provides a structured literature review of 84 business angel articles published between 2000 and 2013, building on the 1999 review contacted by Mason and Harrison. The articles are classified according to the generational framework laid out by Mason and Harrison, which describes first and second generations of articles (prior to 1999) and calls for a third generation of research. We find that Mason and Harrison’s agenda has largely been met, with some notable gaps. We also find that the research is diverse, with many articles falling into what Mason and Harrison call first and second generations. Our paper outlines a new agenda for research focusing on six key areas. Finally, we conclude with a discussion of key implications for policy and practice.
Business failure research has been the focus of renewed interest in the entrepreneurship field. It is complex, being both a sign of economic vibrancy and the source of great individual trauma. An understanding of these complexities is important to academics, practitioners and regulators. This monograph provides a review of the literature to date. It charts the emergence of business failure research in the finance literature through to its recent development within the contemporary entrepreneurship field. The multidiscipline nature of business failure research is explored through incorporation of studies from accountancy, information systems, social psychology, general management, economics and entrepreneurship. Research on the topic is diverse; the lack of a universally accepted definition of failure coupled with the absence of an underpinning theory has resulted in an expansive range of studies. The aim of this review is to provide a comprehensive and critical review of business failure research, bridge the gap between the various perspectives, and develop a cohesive understanding of the phenomena, upon which future studies can be based.
This article proposes that a failing organization goes through a sequence of four stages before finally landing in the morass of death. A four-stage model is proposed to describe this journey, which can lead to failure or to turnaround. By categorizing the elements of failure or turnaround, the model explains how the elements germane to each stage, when combined, facilitate the progression of an organization from crippling deterioration in performance to eventual death or to re-stabilizing survival. To support our contention, we focus on the Canadian retail industry, and specifically on the story of the once very successful but now extinct merchandising icon T. Eaton Co. Ltd., contrasting its fortunes with those of fellow Canadian retail survivors Hudson's Bay Company and Canadian Tire. (c) 2005 Elsevier Ltd. All rights reserved.
Research into entrepreneurial failure is increasing in prevalence. However, there remains a lack of clarity surrounding how failure is conceptualized. This is an important issue because how failure is conceptualized influences the relevance of research questions posed and the comparability of findings across studies. In this article, we review conceptualizations of entrepreneurial failure including at two levels of analysis (firm and individual) and perspectives of failure (objective and subjective). We discuss the implications these conceptualizations have for future research, including the sampling frame and questions scholars ask.
Bankruptcy prediction is becoming more and more important issue in financial decision-making. It is essential to make the companies prevent from bankruptcy through building effective corporate bankruptcy prediction model in time. This study proposes an effective bankruptcy prediction model based on the kernel extreme learning machine (KELM). A two-step grid search strategy which integrates the coarse search with the fine search is adopted to train KELM. The resultant bankruptcy prediction model is compared with other five competitive methods including support vector machines, extreme learning machine, random forest, particle swarm optimization enhanced fuzzy k-nearest neighbor and Logit model on the real life dataset via 10-fold cross validation analysis. The obtained results clearly confirm the superiority of the developed model in terms of classification accuracy, Type I error, Type II error and area under the receiver operating characteristic curve (AUC) criterion. Promisingly, the proposed KELM can serve as a new candidate of powerful early warning systems for bankruptcy prediction with excellent performance.
We propose a formal model that analyzes which entrepreneurial ventures actively seek and subsequently obtain venture capital (VC) financing in thin VC markets. The model shows that in thin VC markets, (1) VC investors will invest in companies in need (frog-kissing) rather than in best performers (cherry-picking), and (2) the best performing ventures will self-select out of the market for VC. These conclusions are in line with the results from the literature, which note that in Europe many entrepreneurial firms do not actively seek VC investment and that VC investors do not appear to possess the same cherry-picking ability that they have in the US.
This paper provides evidence on the performance of business angels’ investments, using a unique data-set covering a representative sample of the main actors in the Italian informal venture capital market. An econometric analysis examines the returns on business angels’ investments and their major determinants, making reference to an original set of independent variables. Whereas previous empirical studies have hypothesised linear relationships between the explanatory variables and the performance of informal venture capitalists’ investments, this work tests different functional forms, both linear and non-linear. The main findings are as follows: (1) the relationship between experience and internal rate of return (IRR) is U-shaped and significant; (2) the widely accepted expectation that investments with a short holding period earn a lower IRR is confirmed by quantitative data; (3) an original explanatory variable – rejection rate – is put into the model and its impact on business angels’ performance is positive, non-linear and significant; (4) the final overall econometric model shows relevant explanatory power, with an R-squared close to 35%. The outcomes of the empirical analysis performed in this study allow the identification of new and concrete insights into possible public policy interventions aimed at stimulating the informal venture capital industry and, therefore, entrepreneurship inside the economic system.
Research on entrepreneurial failure has primarily addressed two issues: the causes and potential consequences of business failure for entrepreneurs. However, few studies are devoted to rethinking the concept of entrepreneurial failure as a multiform phenomenon that involves various configurations. This article extends the understanding of entrepreneurial failure by examining the different configurations that can occur and the associated profiles of failing entrepreneurs. To that end, two major approaches to configuration-theoretically derived typology and empirically grounded taxonomy-have been used to offer a more nuanced view of entrepreneurial failure. This study's findings provide a starting point for a stronger theoretical grounding of research that goes beyond the traditional interpretation of entrepreneurial failure and opens new avenues of research opportunities to explore and compare the different configurations that have emerged and identify the possible dynamism and trajectories among these configurations.
Are the Business Angels likely to coach the entrepreneur from the pre-investment stage while no decision has yet been taken ? If so, what are their reasons and what contribution can they make ? In this paper, the authors set out to study that practice in the pre-investment stage, which is not often investigated in the literature. With the help of an original theoretical framework (the model of the activity system), the authors describe the activities which are at the heart of the interactions between the Business Angels and the entrepreneurs. Their methodology is therefore qualitative and based on a deductive approach. The analysis and the comparison of four cases show that, in spite of the absence of contractual relationship, the Business Angels modify the contents of the project and the entrepreneur accepts those changes because of the contributions they make in terms of explicit and tacit knowledge.
Résumé
Une série de recherches issues de la littérature sur la prévention des défaillances d’entreprises constatent que le processus de défaillance diffère d’une entreprise à l’autre et que, plus particulièrement, toutes les entreprises n’entrent pas pour les mêmes raisons dans un processus de défaillance (Argenti, 1976 ; Laitinen, 1991). Cependant, malgré ce constat, à ce jour, peu de recherches proposent une taxonomie (ou une typologie) 1 mettant en évidence différents profils d’entrée dans un processus de défaillance. Par ailleurs, aucune d’entre elles ne se focalise réellement sur les micro- et petites entreprises en difficulté alors que la littérature démontre que la défaillance de ce type d’entreprises est fréquente et spécifique (Julien, 2005).
Partant de ces lacunes dans la littérature et sur base d’une analyse inductive et qualitative, cet article propose une taxonomie originale. Focalisée sur les micro- et petites entreprises en difficulté, cette dernière met en évidence sept profils spécifiques d’entrée dans un processus de défaillance.
This study examines the impact of both the number and types of causes of business failure on
the failure risk as indicated by values of bankruptcy scores during the process of business decline. Causes of
bankruptcy were obtained from court judgments for 70 Estonian manufacturing firms and classified into two
types of causes of failure such as internal (management deficiencies) or from factors external to the firm. Bankruptcy scores for the first and second pre-bankruptcy years were calculated using both Ohlson’s model and a local (Grünberg’s) bankruptcy prediction model. Findings indicate that multiple causes lead to a significantly higher bankruptcy risk than a single cause for the year prior to the declaration of bankruptcy. On the contrary, no significant effect of different types of failure causes was found on the risk of failure. Implications of the results for research and practice are discussed.
This paper examines how angel investors’ human capital affects the valuation of their portfolio
companies, based on the pre-money valuation of 123 investment rounds in 58 Belgian companies.
We argue that angel investors with higher levels of human capital will perceive a higher valuecreating
potential in entrepreneurial opportunities through their ability to see more valuecreating
options, a higher value-adding potential post-investment and an enhanced legitimacy
provided to the venture. Economic theories suggest they appropriate these rents through lower
valuations, while stewardship theory suggests they share value creation with entrepreneurs.
Consistent with stewardship theory, we show angel investors negotiate higher valuations when
they have higher levels of human capital, more specifically if they studied longer, have a business
degree, more entrepreneurial experience or previous professional law experience. As such, our
results contrast with the behaviour of venture capital investors who negotiate lower valuations
when they have more experience.
Although business failure has been widely studied by researchers in finance and accounting from the financial failure of established firm’s perspective, less attention has been given to new venture failure. To reach a better understanding of this phenomenon which is multidimensional and complex, this paper proposes to reconstruct, in conjunction with an integrative theoretical framework, an operational analysis model. As such, we carry out a strategy of three stages. First, we pursue a preliminary exploration that aims to bring out a global representation of entrepreneurial failure from unstructured interviews conducted with three categories of stakeholders who are the researchers, “privileged witnesses” and the failed entrepreneurs. Second, we conduct more directive interviews with sixteen entrepreneurs known to be failing by “privileged witnesses” to identify the essential dimensions of the phenomenon. Finally, we addressed a qualitative exploration by a study of seven cognitive maps of failed entrepreneurs to identify the relation between dimensions of entrepreneurial failure. Our results indicate that entrepreneurial failure is not the exclusive consequence of the absence or presence of success or failure factors, but the immediate result of the interaction of six key dimensions that this research aims to explore, describe and classify.
The present research links business angels’ cognitive and behavioral features and co-investment practice with professional venture funds in explaining differential rates of growth. Using a questionnaire survey we were able to gather a unique dataset concerning the characteristics, investment practice and growth performance of a sample of 124 business angels having made a total of 222 investments in the south eastern region of France surrounding Grenoble. Our contribution to the literature is twofold: first, this study is the first systematic exploration of the practice of business angels in the French market for entrepreneurial finance, and thus extends our knowledge of angel investing beyond the limits of North America and the United Kingdom. Second, we make a contribution to a better understanding of the determinants of growth in ventures funded by business angels. Strong growth rates are significantly supported when business angels and professional venture capitalists co-invest simultaneously due to a certain cognitive closeness.
Most potential funders wish to see a business plan as a first step in deciding whether or not to invest. However, much of the literature on how to write a business plan fails to emphasize that different types of funder look at business plans from different perspectives. Using a real time methodology this article highlights the different investment criteria of bankers, venture capital fund managers and business angels. Bankers stress the financial aspects of the proposal and give little emphasis to market, entrepreneur or other issues. As equity investors, venture capital fund managers and business angels have a very different approach, emphasizing both market and finance issues. Business angels give more emphasis than venture capital fund managers to the entrepreneur and ‘investor fit’ considerations. The implication for entrepreneurs is that they must customize their business plan according to whether they are seeking funding from a bank, venture capital fund or business angel.
Business angels have been highlighted as important stakeholders for potential high-growth ventures. Extant empirical research provides evidence that they not only contribute with money but also bring added value to the ventures in which they have invested. However, despite the reported benefits of the value added provided by these investors there are very few studies that try to conceptualize this important issue. The present study seeks to meet this shortcoming by presenting a review of literature and research on business angels and value added. The overall objective is to recognize the range of value added activities that business angels have been reported to perform, aggregate the findings into a set of distinct but complementary value adding roles, and then link these roles to theoretical perspectives that explain why they have the potential to contribute to added value. Four different value added roles performed by informal investors are presented together with an explanation of how they can be seen as complementary to each other. The following discussion is then used to guide future studies of business angels and value added towards areas where our knowledge is still limited.
Résumé
La survie et la croissance des entreprises constituent une problématique majeure sur laquelle la recherche en gestion peut apporter des éclairages fondamentaux. De nombreux travaux de recherche sur la défaillance des entreprises soulignent le rôle du dirigeant dans le processus de défaillance, notamment de sa capacité à concevoir une réflexion stratégique. Dans cet article nous avons interrogé, au cours d’une recherche intervention, seize dirigeants de très petites entreprises (TPE) sur leur réflexion stratégique et leur pilotage de l’entreprise. Cette recherche nous permet de proposer une méthodologie de l’accompagnement du dirigeant de TPE dans la conception d’une réflexion stratégique et d’outils de pilotage appropriés.
Venture capital, angel financing, and crowdfunding have evolved and matured in the entrepreneurial finance market. These market developments have also been accompanied by a growing body of research. In this monograph, we provide an overview of a vast body of literature in the field of entrepreneurial equity finance, presenting the current state of research and succinctly identifying its subcategories. We also provide insight into major research trends and research gaps and examine the growing research field of cognition in entrepreneurial equity finance. Our review is structured using a theoretical framework that aims to link venture capital, angels, and crowdfunding whilst considering the significant differences exhibited between each investment stage.
Résumé
Le présent article propose une lecture critique des recherches antérieures qui ont tendance à réduire la complexité de l’échec entrepreneurial. Cette réduction se traduit par une approche unidimensionnelle qui se recentre sur l’unique facette financière de la défaillance d’entreprise, par une approche binaire qui oppose les entreprises performantes à celles qui sont défaillantes, ou encore par une approche linéaire qui explique l’échec entrepreneurial par l’influence marginale d’un nombre limité de facteurs. Articulé autour de trois principales approches : l’approche déterministe centrée sur l’environnement, l’approche organisationnelle centrée sur l’entreprise et l’approche psychologique centrée sur l’entrepreneur, cet article propose une approche holistique de l’échec entrepreneurial en intégrant les dimensions stratégique, managériale et sociale. Fondé sur l’approche configurationnelle, le présent article propose également une typologie qui peut servir de cadre conceptuel pour mieux appréhender le caractère à la fois multifactoriel, multidimensionnel et multiforme de l’échec entrepreneurial.
This paper provides preliminary evidence on the effects of membership in a business angel network (BAN) on the investment decisions of the members. Using a novel dataset containing qualitative and quantitative information on 810 angel or angel-group backed investments in 619 companies by 330 unique business angels from 2008 to 2014, we show that BAN membership generates valuable information, networking, monitoring, and risk reduction effects, which ultimately affect the share of personal wealth committed by each angel investor and their equity stake in the targeted company. These results extend our knowledge of the investment behavior and characteristics of business angels, a relatively opaque funding source that is rapidly gaining prominence in support of new ventures and the development of the global economy.
This article examines the differences and features displayed by business angels (BAs), depending on the extent of their involvement with, and support for, the start-ups they finance measured by expertise, experience and contacts. With a sample of 293 Spanish BAs, using data obtained from the Global Entrepreneurship Monitor (GEM) survey, our results indicate that investors who develop more rigorous screening processes in the pre-investment process and hold regular meetings with founder teams are more likely to become High Value-Added Business Angels (HVBAs). Accordingly, the ability of BAs to transfer so-called ‘smart capital’ is conditioned by the levels of screening and assessment applied at the pre-investment stage in terms of both the quality of projects and founder teams and the extent to which the expectations and profiles of the two parties match.
Where there is uncertainty, there is bound to be failure. It is not surprising therefore, that many new ventures fail. What happens to entrepreneurs when their business fails? We hear of highly successful entrepreneurs extolling the virtues of failure as a valuable teacher. Yet, the aftermath of failure is often fraught with psychological, social and financial turmoil. The purpose of this article is to review research on life after business failure for entrepreneurs, from the immediate aftermath through to recovery and re-emergence. First, we examine the financial, social and psychological costs of failure, highlighting factors that may influence the magnitude of these costs (including individual responses to managing these costs). Second, we review research that explains how entrepreneurs make sense of and learn from failure. Finally, we present research on the outcomes of business failure, including recovery as well as cognitive and behavioral outcomes. We develop a schema to organize extant work and use this as a platform for developing an agenda for future research.
Upper echelon theory highlights the importance of top management teams in large and established firms; however, effects are not always clear outside of this context. Due to the unique nature of new ventures, the composition of entrepreneurial teams and its effects on performance is worthy of investigation. Accordingly, we meta-analyze the effect of three characteristics of entrepreneurial team composition (i.e., aggregated, heterogeneity, team size) on new venture performance. Our meta-analysis, which includes 55 empirical samples and 8,892 observations, finds significant and unique effects of entrepreneurial team characteristics on new ventures. Based on our findings, we derive avenues for future research.
This report covers seed stage financing for high growth companies in OECD and non-OECD countries with a primary focus on angel investment. The paper provides an overview of angel financing, including a description of how it has evolved in OECD and non-OECD countries and policy interventions taken within some countries.
In this article, we study the decision-making criteria that business angels (BAs) adopt when screening business opportunities in the different assessment phases (pre-screening, screening and due diligence). We exploit an original dataset of 1942 ventures that sought angel investment from 2008 to 2014 from the members of Italian Angels for Growth (IAG). Results have shown that the emphasis that BAs place on rejection criteria and contact channels varies along the three considered stages of the investment process. In particular, we found that business proposals brought to the attention of BAs by venture capitalists are more likely to get through the pre-screening stage, suggesting an important quality certification role played by venture capitalists. Moreover, at the screening stage (in comparison with the pre-screening stage), proposals are rejected more often for reasons related to the characteristics of the entrepreneur and management team and less often for the lack of business innovativeness. Finally, business proposals showing lower levels of profitability are more likely to be rejected after the due diligence.
This article documents the fact that ventures funded by two successful angel groups experience superior outcomes to rejected
ventures: They have improved survival, exits, employment, patenting, Web traffic, and financing. We use strong discontinuities
in angel- funding behavior over small changes in their collective interest levels to implement a regression discontinuity
approach. We confirm the positive effects for venture operations, with qualitative support for a higher likelihood of successful
exits. On the other hand, there is no difference in access to additional financing around the discontinuity. This might suggest
that financing is not a central input of angel groups.
We model entrepreneurial learning as a calibrated algorithm of an iterated choice problem in which entrepreneurs learn by updating a subjective stock of knowledge accumulated on the basis of past experiences. Specifically, we argue that entrepreneurs repeat only those choices that appear most promising and discard the ones that resulted in failure. The contribution of the paper is twofold. First, we provide a structural model of entrepreneurial learning in which failure Is as Informative-though clearly not as desirable-as success. Second, to complement standard economic models in which agents are rational, we allow our entrepreneurs to have myopic foresight. Our entrepreneurs process Information, make mistakes, update their decisional algorithms and, possibly, through this struggle, Improve their performance. [ABSTRACT FROM AUTHOR]
This study explores a model of venture investing developed from the literature on formal venture capital research in the setting of angel investing in the USA. The model explores the role of venture stage, due diligence, deal flow, co-investing and post investment participation on the distribution of returns to angel investors. Doing so directly addresses an interesting question regarding the extent to which formal venture capital practices are appropriate and effective in the typical angel investment setting. In the process, results from the first relatively large-scale study of angel investor outcomes in the USA are reported and related to earlier findings for UK angel investors.
The nature and extent of complementarities between the informal and formal venture capital markets has been the subject of limited research. This paper explores systematically the nature and extent of complementarities between the formal and informal venture capital markets in the UK, and identifies the opportunities for additional collaboration. Evidence is presented from surveys of business angels and venture capital fund managers for four types of complementarities: co-investing in deals; sequential investing in ventures; business angels as investors in venture capital funds; and deal referring.
In this paper I use the psychological literature on grief to explore the emotion oi business failure, suggesting that the loss of a business from failure can cause the self-employed to feel grief—a negative emotional response interfering with the ability to leam from the events surrounding that loss. I discuss how a dual process of grief recovery maximizes the leaming from business failure.
Business failure prediction is a topic of great importance for a lot of people (shareholders, banks, investors, suppliers,…).
That’s why a lot of models were developed in order to predict it. Statistical procedures (multiple discriminant analysis,
logit or probit) were among the most used methods in this kind of problem. However, parametric statistical methods require
the data to have a specific distribution. In addition to the restriction on the distribution involved, multi-collinearity,
autocorrelation and heteroscedasticity could lead to problems with the estimated model with some statistical methods. Because
of these drawbacks, others methods have been investigated: multicriteria methods (i.e. UTA, Electre tri,…) or machine learning
methods (i.e. neural network, genetic algorithm, decision tree, instance based learning,…). Our main target is to provide
a review of the literature but also to have a larger view than usually by evoking causes, symptoms and remedies of bankruptcy.
We also proposed new perspectives and topics of research.
This book discusses the development of a theory on the growth of the firm. It is shown that the resources with which a particular firm is accustomed to working will shape the productive services its management is capable of rendering. The experience of management will affect the productive services that all its other resources are capable of rendering. As management tries to make the best use of the resources available, a ‘dynamic’ interacting process occurs which encourages growth but limits the rate of growth.
This study advances knowledge in the field of new venture funding, specifically on angel investing by examining the angel investors who found new banks. Angel investors are an important source of start-up capital; capital provided by angels worldwide is estimated to be many times the amount provided by venture capitalists. As a foundation, the study provides a composite profile of general angel investors drawing upon Benjamin, Freear, Gaston, Margulis, Robinson, Sohl, Van Osnabrugge, and Wetzel. It also draws upon Sullivan & Miller’s work on investment motivations and investor type clusters. In addition to advancing the discipline’s knowledge on angel investors, the study is also relevant to banking industry structure research. While there have been studies of economic factors leading to new bank formation, there has been no study of what motivates the angel investors that fund new banks.
This paper provides a detailed comparison of the investment criteria and procedures of business angels (BAs) and venture capitalists (VCs) across the full investment process. To make the study more robust, a theoretical base is adopted (based on agency theory) to form research hypotheses which propose that BAs and VCs in the UK may use different approaches to limit potential agency risks in their investments (i.e. the risks associated with an entrepreneur's potential misuse of the investor's money). Utilizing data from 40 personal interviews and 262 questionnaire responses, this study empirically supports the main hypothesized notion that, although both investors reduce agency risks at all stages of the investment process, BAs place more emphasis on doing so ex post investment (the incomplete contracts approach), while VCs stress doing so more ex ante investment (the principal-agent approach).