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School of Business | Department of Finance | Finance | 2014
Thesis number: 13765
Business angel investment decision-making criteria
Author: Ahtila, Olli-Pekka
Title: Business angel investment decision-making criteria
Year: 2014  Language: eng
Department: Department of Finance
Academic subject: Finance
Index terms: rahoitus; financing; sijoittajat; investors; riskirahoitus; venture capital; päätöksenteko; decision making
Pages: 86
Full text:
» hse_ethesis_13765.pdf pdf  size:2 MB (1270671)
Key terms: business angels; investment decision-making; investment criteria; rejection criteria

The purpose of the thesis is to provide new evidence and address the partially lacking understanding of business angel decision-making. This thesis studies the issue by investigating both the investment criteria and the rejection criteria business angels use to decide whether an opportunity should advance beyond the initial screening stage to the due diligence. The study focuses on the pitch meetings, in which entrepreneurs try to sell their ideas and equity to business angels in exchange for capital.


The unique hand-coded data on business angels is sourced from a TV show called the Dragons' Den. By analysing the latest two UK production seasons, I was able to observe the decision-making process of seven business angels, of which three were female. The total number of observed pitch meetings amounts to 129, which consists of 27 successful pitches and 102 declined ones. The empirical evidence of business angel rejection criteria is based on 241 rejection reason provided by the investors. The above-average sample size is considered to be reasonable in the area of studying business angel decision-making.


The results suggest that business angels invest primarily in early stage or start-up companies seeking for expansion financing. In their investment decision-making, business angels place emphasis on the entrepreneur, product and financials and intend to add value by taking hands-on roles. On the other hand, the partially contradictory findings to prior literature suggest, that the most important rejection criteria are related to financials, product and market. My findings also suggest that the investor fit criteria and investors' gender is affecting the decision-making of business angels.
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