Improving the role of business in financing entrepreneurship: a positioning map for US angel groups

Mario Sorrentino, Antonio Esposito


Business angels are informal investors who collectively make-up the informal venture capital market (IVCM). Business angels represent the oldest and largest source of seed and start up equity capital for new entrepreneurial ventures in the US. An increasing role in the development of the US informal venture capital market is currently played by “angel groups”. These groups are increasing the professional level of the informal venture capital market as they establish and adopt clear routines and criteria for their operational activity. However, despite its importance and recent evolution, the informal venture capital market (both in US and in UK) is still far from be fully efficient. One of the most powerful 39 factors which fuels the inefficiency of the informal venture capital market is poor deal flow. Apart from the low quality of business plans, poor deal flow is fuelled by the fact that business angels do not see enough business plans that meet their investment criteria. The mismatch between the profile of investors and the nature of business plan lowers probability of matching between demand and supply and, in turn, fuels market inefficiency. Recent studies indicate that this mismatch is affecting not only individual investors but also angel groups. The present paper investigates the “mismatch problem” which affect US angel groups. Based on a content analysis of a sample of 28 US angel group Websites, the paper proposes an original framework which maps the main angel groups’ features by taking into account few behavioural dimensions. The output of a categorical principal component analysis is mapped on two dimensions that largely explain the main angel groups’ similarities and differences: the professional level, and the ethical mission of the angel groups’ members. One main implication for practice is that the map could be used as a useful tool for entrepreneurs looking for funding in order to meet the business angels’ investment criteria. In fact the map can help an entrepreneur to rapidly select the “right” angel group, taking into account a limited number of investors’ behavioural dimensions.


Entrepreneurship; Business angel groups; Start up

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