Understanding Business Angels: A Reading List

Over the last seven years of my PhD research, I read over 2000 reference works related to business angels. Reading all those articles, books and papers, after 15 years of being an angel investor was a great pleasure. The PhD adventure gave me the opportunity to combine theory and practice.?

I selected 20+ that impressed me the most and I’d like you to read them too. These references were sources of inspiration to me while formulating the basis of my business angel critical thought.?

I have to say, research around angel investors is deprived of angel practice in many aspects. Many scientists just report on how angels are doing things without adding broader views and critical thought on practical implications.?

Angel investing research lacks integration with other disciplines such as finance, micro-economy, psychology, marketing, consumer behaviour, organizational behaviour, and career development. Incorporating new blocks of thought and analyses will help us see business angels and their activity in a new light. To be fair, I have witnessed some amateurism, degrees of conformism, confusion on angel positioning, and a kind of pseudo-establishment culture about how things should work in business angel practice.?

There is an annoying lack of knowledge and new ideas to organize, prepare and live the real angel experience. Further dialogue between scientists, angels and entrepreneurs is going to make the angel industry of the future. It will make the steps toward more organized, and recognised by the society. The creation of this dialogue will have a long-term satisfactory experience for all.

Here is the selection I promised you in the beginning.?

To business angels, these unique investors with entrepreneurial souls who believe in the “unbelievable” (investing before it is made) and trust the “untrustable” ( investing in people before they are proven).?

Have a great read and enjoy.

• ”Technovation and the informal investor” (Wetzel, 1981)

Here Wetzel explores connections between financially sophisticated individuals and innovation funding, proposing informal investors, the business angel concept's preamble.

• ”Angels and Informal Risk Capital” (Wetzel, 1983)

This is an interesting one. In 1983, for the first time, the word "business angel" was written in a scientific paper.

To Wetzel, W. E. we owe the first steps on a path in research about us, Business Angels.

• Finding Private Venture Capital for Your Firm: A Complete Guide. (Gaston, 1989)

Who are business angels? In the late 80s and early 90s, several studies addressed business angel’s types and motivations. Gaston identified ten different types of angels. From then on, several other types of studies followed, identifying more than 50 terminologies, typologies and styles of business angels.

• When do venture capitalists add value? (Sapienza, 1992)

Sapienza explores for the first time the idea of value-added, creating the first measurement to show that even venture capitalists are more than just financial investors and that they add value to the invested startups, also offering essential implications.

Even venture capitalists are more than just financial investors.

• Segmenting the informal venture capital market: Economic, hedonistic, and altruistic investors. (Sullivan and Miller, 1996)

Sullivan segments the angel market into three major types: Economic, Hedonistic, and Altruistic Investors. This is a critical study looking at angels from a marketing perspective, broadening the dominating strict financial perspective.

• Angel Investing: Matching Startup Funds with Startup Companies: The Guide for Entrepreneurs and Individual Investors.(Van Osnabrugge and Robinson, 2000)

Osnabrugge lists and clarifies the differences between BAs and VCs (Venture Capitalists) by assuming that

Business angels are more than mere financial investors.

• Informal investors as entrepreneurs - the development of an entrepreneurial career. (Politis and Landstrom, 2002)

Politis & Landstrom looked into angel investing from a career development perspective. This work was way ahead of its time.

• Angel Capital: How to Raise Early-Stage Private Equity Financing (Benjamin and Margulis, 2005)

A complete guide to understanding the angel investor, what business angels want from a deal, different types of investors and the angel investment processes, due diligence, legal aspects and startup valuation. A great global book on angel investing.

• Informal Sources of Venture Finance (Mason, 2006)

Definitional aspects! The most consensual definition of business angels. This reference work requires updating since the angel market has changed in the last years, with the denominated democratization of the early stage.?Angels investing in groups, with crowdfunding on one side?and venture capitalists on the other, the angel lives a new positioning and identitarian problem.

• Returns to Angel Investors in Groups (Wiltbank and Boeker, 2007)

Wiltbank is a significant author exploring diverse types of angel financial outcomes, individual, group, portfolio, etc. A fundamental reference focused on angel groups' financial returns. This paper was the first to research returns of the angel groups.

• Close-ups from afar: the nature of the informal venture capital market in a spatial context (Avdeitchikova, 2008)

Sofia developed great work regarding the impact of distance (physical distance and other distances) developing our understanding of the role of proximity in informal venture capital investing.

• Business angels and value-added: what do we know and where do we go? (Politis, 2008)

Politis make a complete review of the value besides the money angels add to the invest startups. Creating value is a fundamental part of the investment purpose.

• The Pre-and Post-investment relationship between angel investors and entrepreneurs: The scope and impact of Information problems and Conflicts. (Collewaert, 2009)

Veroniek provides great insights into the scope and impact of potential pre and post-investment problems between angel investors and entrepreneurs.

• Invest to EXIT (McKaskill, 2009)

McKaskill explores a pragmatic strategy to deal with a critical angels’ challenge - our investments’ exit phase.

• The Gatekeepers and Syndicates (Paul and Whittam, 2010)

Paul explores the new role of angel groups & syndicates: the gatekeepers. He also anticipates a change in the angel market.

• Business angel early-stage decision making (Maxwell et al., 2011)

Maxwell developed significant research to understand the decisional criteria on how angels select their investing opportunities identifying angel practices and heuristics and critical factors to make the go or no go of the angel investing process.

• Angel Investing (Rose, 2014)

David Rose, the founder of the NY Angels, is the mage, the guru, the spiritual and pragmatic leader of angel investing. This work connects a well-reasoned thought with a pragmatic approach.

Like all the religions have a pope or a spiritual leader, business angels have David Rose.

In my opinion, David Rose is one of the best thinkers and doers when it comes to learning about business angels pragmatically. He is maybe the biggest angel influencer in the world. He is inspirational, enthusiastic, pragmatic, simple and profound at the same time.

Let me say it out loud, this book is a must-read for those who want to understand business angels.

• The transformation of the angel market (Mason et al., 2016)

Mason & colleagues explore the transformation and organisation of the angel market with substantial research and practical implications. Mason is one of the most published scientists on angel investing.

• Angels versus crowdfunding (Boch and Tatomir, 2018)

Boch compares angels and crowdfunding performance and concludes that

angels add more value and have better results than crowdfunding investors.

• Stairway to heaven? rethinking angel investment policy and practice (Harrison et al., 2020)

Harrison and colleagues analyse the current process and impact of angel investing. The authors suggest the need for angel investors to build a significant portfolio of investments to be reasonably sure of making an overall acceptable return.