Determinants that Impact the Investment Decision of Angel Investors on Startups
Main Article Content
Abstract
Angel investment is important for startups when they are in between the seed-stage and the early-stage because they need funds to grow rapidly. Angel investors, in addition to providing capital, normally function as strategic partners who provide capacity building, management knowledge and mentorship for startups. Angel investors accordingly benefit startups in many different ways, including the provision of funds. Vietnam is ranked third in Southeast Asia in terms of the number of active startups, most of which are in an early stage and therefore in need of funds from angel investors. The paper examines the concept of angel investment and the determinants that impact angel investors’ decisions. The paper then recommends implications so as to help build a mechanism to develop domestic angel investment activities and attract foreign angel investment into Vietnam.
Keywords:
Angel investment, startup
References
[1] Robehmed, Natalie, What Is A Startup?, Forbes, https://www.forbes.com/sites/natalierobehmed/2013/12/16/what-is-a-Startup/, 2013 (accessed 13th August 2020).
[2] A. Ganti, A. Investor, Investopedia, https://www.investopedia.com/terms/a/angelinvestor.asp, 2020 (accessed 13th August 2020).
[3] 106 Must-Know Startup Statistics for 2020, Embroker, https://www.embroker.com/blog/Startup-statistics/, 2020 (accessed 13th August 2020).
[4] W. Kerr, J. Lerner, A. Schoar, “The Consequences of Entrepreneurial Finance: A Regression Discontinuity Analysis”, NBER Working Paper No. 15831, March 2010.
[5] R. Elitzur, A. Gavious, “Contracting, signaling, and moral hazard: A model of entrepreneurs, “angels”, and venture capitalists”, Journal of Business Venturing 18 (2003) 709-725.
[6] R. Sudek, “Angel investment criteria”, Journal of Small Business Strategy, 17 (2006) 2, p89-103.
[7] C. Mitteness, R. Sudek, M.S. Cardon, “Angel investor characteristics that determine whether perceived passion leads to higher evaluations of funding potential”, Journal of Business Venturing 27 (2012), p592-606.
[8] M. Wallnöfer, F. Hacklin, “The business model in entrepreneurial marketing: A communication perspective on business angels’ opportunity interpretation”, Industrial Marketing Management, Vol 42, Issue 5 (2013), p755-764.
[9] C. Carpentier, J.M. Suret, “Angel group members’ decision process and rejection criteria: A longitudinal analysis”, Journal of Business Venturing, Vol 30, Issue 6 (2015) 808-821.
[10] S. Bernstein, A. Korteweg, K. Laws, “Attracting Early Stage Investors: Evidence from a Randomized Field Experiment”, Journal of Finance 72(2) (2017) 509-538.
[11] S. Teker, D. Teker, “Venture Capital and Business Angels: Turkish Case”, Procedia - Social and Behavioral Sciences 235 (2016) 630-637.
[12] B.J. Warnick, C.Y. Murnieks, J.S. McMullen, W.T. Brooks, “Passion for entrepreneurship or passion for the product? A conjoint analysis of angel and VC decision-making”, Journal of Business Venturing 33 (2018) 315-332.
[13] S. Prowse, “Angel investors and the market for angel investments”, Journal of Banking & Finance 22 (1998) 785-792.
[14] M.M. Hopkins, “Exploring funding routes for therapeutics firms”, A Biotech Manager’s Handbook, 2012, pp. 131-155.
[15] G.A. Rights, A.P. Groh, “Specialist versus Generalist Investors: Trading off Support Quality, Investment Horizon and Control”, European Economic Review 101 (2018) 459-478.
[16] D. Cumming, A.P. Groh, “Entrepreneurial finance: Unifying themes and future directions”, Journal of Corporate Finance Volume 50 (2018) 538-555.
[17] H. Landstrom, “Informal investors as entrepreneurs: Decision-making criteria used by informal investors in their assessment of new investment proposals”, Technovation 18(5) (1998) 321-333.
[18] K. Hindle, L. Lee, “An exploratory investigation of informal venture capitalists in Singapore”, Venture Capital: An International Journal of Entrepreneurial Finance 4(2) (2002) 169-177.
[19] R. Aernoudt, “Business angels: The smartest money for starters? Plea for a Renewed Policy Focus on Business Angels”, International Journal of Business 10(3) (2005) 271-284.
[20] E. Gimmon, J. Levie, “Founder’s human capital, external investment, and the survival of new high-technology ventures”, Research Policy 39(9) (2010) 1214-1226.
[21] A. Dibrova, “Business angel investments: risks and opportunities”, Social and Behavioral Sciences 207 (2015) 280-289.
[22] J. Lerner, “Angel financing and public policy: An overview”, Journal of Banking & Finance 22 (1998) 773-783.
[23] L. Changhong, S. YuliWu, Zhenyu Wu, Li Zheng, “Policies of Promoting Entrepreneurship and Angel Investment: Evidence from China”, Emerging Markets Review 29 (2016) 154-167.
[24] G.E. Dubreuil, ArvindAshta, J.P. Hédou, “Micro-equity for sustainable development: Selection, monitoring and exit strategies of micro-angels”, Ecological Economics 130 (2016) 117-129.
[25] J. Lerner, A. Schoar, S. Sokolinski, K. Wilson, “The Globalization of Angel Investments: Evidence Across Countries”, Journal of Financial Economics 127 (2018) 1-20.
[26] Vietnam’s Innovation Ecosystem 2019 Report, Australian Trade and Investment Commission Vietnam/, 2019.
https://www.austrade.gov.au/local-sites/ vietnam/news/vietnam_innovation_ecosystem (accessed 13th August 2020).
[2] A. Ganti, A. Investor, Investopedia, https://www.investopedia.com/terms/a/angelinvestor.asp, 2020 (accessed 13th August 2020).
[3] 106 Must-Know Startup Statistics for 2020, Embroker, https://www.embroker.com/blog/Startup-statistics/, 2020 (accessed 13th August 2020).
[4] W. Kerr, J. Lerner, A. Schoar, “The Consequences of Entrepreneurial Finance: A Regression Discontinuity Analysis”, NBER Working Paper No. 15831, March 2010.
[5] R. Elitzur, A. Gavious, “Contracting, signaling, and moral hazard: A model of entrepreneurs, “angels”, and venture capitalists”, Journal of Business Venturing 18 (2003) 709-725.
[6] R. Sudek, “Angel investment criteria”, Journal of Small Business Strategy, 17 (2006) 2, p89-103.
[7] C. Mitteness, R. Sudek, M.S. Cardon, “Angel investor characteristics that determine whether perceived passion leads to higher evaluations of funding potential”, Journal of Business Venturing 27 (2012), p592-606.
[8] M. Wallnöfer, F. Hacklin, “The business model in entrepreneurial marketing: A communication perspective on business angels’ opportunity interpretation”, Industrial Marketing Management, Vol 42, Issue 5 (2013), p755-764.
[9] C. Carpentier, J.M. Suret, “Angel group members’ decision process and rejection criteria: A longitudinal analysis”, Journal of Business Venturing, Vol 30, Issue 6 (2015) 808-821.
[10] S. Bernstein, A. Korteweg, K. Laws, “Attracting Early Stage Investors: Evidence from a Randomized Field Experiment”, Journal of Finance 72(2) (2017) 509-538.
[11] S. Teker, D. Teker, “Venture Capital and Business Angels: Turkish Case”, Procedia - Social and Behavioral Sciences 235 (2016) 630-637.
[12] B.J. Warnick, C.Y. Murnieks, J.S. McMullen, W.T. Brooks, “Passion for entrepreneurship or passion for the product? A conjoint analysis of angel and VC decision-making”, Journal of Business Venturing 33 (2018) 315-332.
[13] S. Prowse, “Angel investors and the market for angel investments”, Journal of Banking & Finance 22 (1998) 785-792.
[14] M.M. Hopkins, “Exploring funding routes for therapeutics firms”, A Biotech Manager’s Handbook, 2012, pp. 131-155.
[15] G.A. Rights, A.P. Groh, “Specialist versus Generalist Investors: Trading off Support Quality, Investment Horizon and Control”, European Economic Review 101 (2018) 459-478.
[16] D. Cumming, A.P. Groh, “Entrepreneurial finance: Unifying themes and future directions”, Journal of Corporate Finance Volume 50 (2018) 538-555.
[17] H. Landstrom, “Informal investors as entrepreneurs: Decision-making criteria used by informal investors in their assessment of new investment proposals”, Technovation 18(5) (1998) 321-333.
[18] K. Hindle, L. Lee, “An exploratory investigation of informal venture capitalists in Singapore”, Venture Capital: An International Journal of Entrepreneurial Finance 4(2) (2002) 169-177.
[19] R. Aernoudt, “Business angels: The smartest money for starters? Plea for a Renewed Policy Focus on Business Angels”, International Journal of Business 10(3) (2005) 271-284.
[20] E. Gimmon, J. Levie, “Founder’s human capital, external investment, and the survival of new high-technology ventures”, Research Policy 39(9) (2010) 1214-1226.
[21] A. Dibrova, “Business angel investments: risks and opportunities”, Social and Behavioral Sciences 207 (2015) 280-289.
[22] J. Lerner, “Angel financing and public policy: An overview”, Journal of Banking & Finance 22 (1998) 773-783.
[23] L. Changhong, S. YuliWu, Zhenyu Wu, Li Zheng, “Policies of Promoting Entrepreneurship and Angel Investment: Evidence from China”, Emerging Markets Review 29 (2016) 154-167.
[24] G.E. Dubreuil, ArvindAshta, J.P. Hédou, “Micro-equity for sustainable development: Selection, monitoring and exit strategies of micro-angels”, Ecological Economics 130 (2016) 117-129.
[25] J. Lerner, A. Schoar, S. Sokolinski, K. Wilson, “The Globalization of Angel Investments: Evidence Across Countries”, Journal of Financial Economics 127 (2018) 1-20.
[26] Vietnam’s Innovation Ecosystem 2019 Report, Australian Trade and Investment Commission Vietnam/, 2019.
https://www.austrade.gov.au/local-sites/ vietnam/news/vietnam_innovation_ecosystem (accessed 13th August 2020).