Essays on Angel Investing in the Entrepreneurial Ecosystem

Abstract

Throughout its three chapters, this dissertation examines a phenomenon that, although underappreciated and underinvestigated in the existing literature, should be of great interest to entrepreneurship scholars: angel investing in the United States. The resulting empirical patterns, both qualitative and quantitative, when taken in their entirety suggests that angel investing is a social process, and particularly that entrepreneurs are socialized into becoming angel investors by interacting with the angels who finance their ventures. Further, this work offers evidence that community-level patterns of socialization — i.e. what is generally known in sociology as community social capital — also plays a role in determining whether entrepreneurs will become angel investors and, once they choose to take this step, whether they will show a preference for financing local ventures vis-à-vis pursuing investment opportunities elsewhere. Finally, this work also addresses the question of angel investing outcomes — that is, why some angel investors are more successful than others, as measured by the number of exits in their investment portfolio. In this regard, empirical results suggest that generalists do better than specialists, and that angel investors with broad entrepreneurial experience are found to do especially well. Success is also a function of effective knowledge translation: on average, successful entrepreneurs tend to become more successful angels, and especially so the greater the overlap between the entrepreneurial experience of the founder and their angel investment portfolio.

Keywords: entrepreneurship, angel investing, venture financing, ecosystem, social capital, reciprocity