BUSINESS ANGELS AND INVESTMENT REJECTION REASONS: A QUALITATIVE STUDY BY USING EXPLORATORY SEQUENTIAL MIXED METHOD
Keywords:
Business Angel, Investment Rejection Reason, Opportunities, EntrepreneurAbstract
The main focus of this study is to evaluate the decision making process of business angels and the reasons for which they reject investment opportunities. According to heterogenetic views of business angels, their investment criteria might be different corresponding to their knowledge and preferences. The data of nineteen(19) business angels from different cities of Pakistan was collected by face to face interviews, through phone calls, and email interviews. The study confirms that the rejection reasons are mostly related to the management team and entrepreneur. However, they do not predict the reasons for rejection of investment opportunities nor do their characteristics clarify the number of rejection reasons. This could be due to the trend of business angels to join groups of business angels and through shared experiences, for which they behave accordingly. Unlike previous studies, this paper provides guidance to entrepreneurs with reference to Pakistani business angels, about which reasons to be avoided to get investment opportunities. Moreover, it provides actual investment criteria for business angels.
References
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in business angels’ research: toward a consensus. Management
Decision, 55(2), 310-330.
Bessière, V., Stephany, E., & Wirtz, P. (2019). Crowdfunding, business
angels, and venture capital: an exploratory study of the concept
of the funding trajectory. Venture Capital, 1-26.
Block, J., Fisch, C., Vismara, S., & Andres, R. (2019). Private equity investment
criteria: An experimental conjoint analysis of venture capital, business
angels, and family offices. Journal of Corporate Finance.
Block, J. H., Fisch, C. O., Obschonka, M., & Sandner, P. G. (2019). A
personality perspective on business angel syndication. Journal
of Banking & Finance, 100, 306-327.
Bonini, S., Capizzi, V., Valletta, M., & Zocchi, P. (2018). Angel network
affiliation and business angels’ investment practices. Journal of
Corporate Finance, 50, 592-608.
Brettel, M. (2003). Business angels in Germany: a research note.
Brush, C. G., Edelman, L. F., & Manolova, T. S. (2012). Ready for
funding? Entrepreneurial ventures and the pursuit of angel
financing. Venture Capital, 14(2-3), 111-129.
Croce, A., Tenca, F., & Ughetto, E. (2016). How business angel groups
work and what rejection criteria in investment evaluation.
International Small Business Journal.
Croce, A., Tenca, F., & Ughetto, E. (2017). How business angel groups
work: rejection criteria in investment evaluation. International
Small Business Journal, 35(4), 405-426.
Feeney, L., Haines Jr, G. H., & Riding, A. L. (1999). Private investors’
investment criteria: insights from qualitative data. Venture
Capital: An international journal of entrepreneurial finance,
1(2), 121-145.
Firms, F. H. G. (2011). The Role of Angel Investors. Paris: OECD
Publishing.
Fisch, C. (2019). Initial coin offerings (ICOs) to finance new ventures.
Journal of Business Venturing, 34(1), 1-22.
Frani?, S., & Drnovšek, M. (2019). The role of regulatory focus and
cognitive style in business angels’ evaluation of an investment
opportunity. Venture Capital, 1-25.
Geibel, R., & Yang, J. (2018). Extended study on characterizing business
angels and their impact on start-up success. GSTF Journal on
Business Review (GBR), 5(1).
Grilli, L. (2019). There must be an angel? Local financial markets,
business angels and the financing of innovative start-ups.
Regional Studies, 53(5), 620-629.
Haar, N. E., Starr, J., & MacMillan, I. C. (1988). Informal risk capital
investors: investment patterns on the East Coast of the USA.
Journal of Business Venturing, 3(1), 11-29.
Haines Jr, G. H., Madill, J. J., & Riding, A. L. (2003). Informal investment
in Canada: financing small business growth. Journal of Small
Business & Entrepreneurship, 16(3-4), 13-40.
Hoyos-Iruarrizaga, J., Fernández-Sainz, A., & Saiz-Santos, M. (2017).
High value-added business angels at post-investment stages: Key
predictors. International Small Business Journal, 35(8), 949-968.
Hsu, D. K., Haynie, J. M., Simmons, S. A., & McKelvie, A. (2014). What
matters, matters differently: a conjoint analysis of the decision
policies of an angel and venture capital investors. Venture
Capital, 16(1), 1-25.
Kafeshani, A. A., Rezvani, M., Chitsazan, H., & Kazemi, R. M. (2018).
The Art of Fundraising from Business Angels Based on
Entrepreneurial Marketing: A New Insight. International Journal
of Entrepreneurship, 22(3), 1-10.
Kelly, P. (2007). 12 Business angel research: The road travelled and the
journey ahead, Handbook of research on venture capital, 1, 315.
Khan, Z., & Lew, Y. K. (2018). Post-entry survival of developing economy
international new ventures: A dynamic capability perspective.
International Business Review, 27(1), 149-160.
Landström, H. (1992). The relationship between private investors and
small firms: an agency theory approach. Entrepreneurship &
Regional Development, 4(3), 199-223.
Levratto, N., Tessier, L., & Fonrouge, C. (2018). Business performance
and angels presence: a fresh look from France 2008–2011. Small
Business Economics, 50(2), 339-356.
Mason, C., Botelho, T., & Zygmunt, J. (2017). Why do business angels
reject investment opportunities: Is it personal? International
Small Business Journal, 35(5), 519-534.
Mason, C., & Harrison, R. (1996). Why business angels’ say no: a case
study of opportunities rejected by an informal investor syndicate.
International Small Business Journal, 14(2), 35-51.
Mason, C., & Rogers, A. (1996). Understanding the business angel’s
investment decision: Univ. Southampton, Department of Geography.
Mason, C., & Rogers, A. (1997). The business angel’s investment decision:
An exploratory analysis. Paper presented at the National Small
Firms Policy and Research Conference.
Mason, C. M., Botelho, T., & Harrison, R. (2013). The transformation of
the business angel market: evidence from Scotland.
Mason, C. M., & Harrison, R. T. (1994). Informal venture capital in the UK.
Mason, C. M., & Harrison, R. T. (1996). Informal venture capital: a study
of the investment process, the post-investment experience and
investment performance. Entrepreneurship & Regional
Development, 8(2), 105-126.
Mason, C. M., & Harrison, R. T. (2015). Business angel investment
activity in the financial crisis: UK evidence and policy
implications. Environment and Planning C: Government and
Policy, 33(1), 43-60.
Maxwell, A. L., Jeffrey, S. A., & Lévesque, M. (2011). Business Angel’s
early-stage decision making. Journal of Business Venturing,
Mitteness, C. R., Baucus, M. S., & Sudek, R. (2012). Horse vs jockey?
How the stage of the funding process and industry experience
affect the evaluations of angel investors. Venture Capital, 14(4),
241-267.
Paul, S., Whittam, G., & Johnston, J. B. (2003). Operation of the informal
venture capital market in Scotland. Venture Capital, 5(4), 313-335.
Payne, J. W., Bettman, J. R., & Johnson, E. J. (1988). Adaptive strategy
selection in decision making. Journal of Experimental
Psychology: Learning, Memory, and Cognition, 14(3), 534.
Payne, J. W., Bettman, J. R., & Johnson, E. J. (1992). Behavioural decision
research: A constructive processing perspective. Annual Review
of Psychology, 43(1), 87-131.
Pedchenko, N., Strilec, V., Kolisnyk, G. M., Dykha, M. V., & Frolov, S.
(2018). Business angels as an alternative to financial support at
the early stages of small businesses’ life cycle.
Prohorovs, A., Fainglozs, L., & Solesvik, M. (2019). Measuring Activity
of Business Angels in Central and Eastern European Counties.
Paper presented at the Proceedings of 33rd IBIMA Conference.
Reitan, B., & Sorheim, R. (2000). The informal venture capital market in
Norway? Investor characteristics, behaviour and investment
preferences. Venture Capital: An International Journal of
Entrepreneurial Finance, 2(2), 129-141.
Riding, A., Duxbury, L., & Haines Jr, G. (1995). Financing enterprise
development: decision-making by Canadian angels. School of
Business, Carleton University, Ottawa.
Robson, P. J., Wijbenga, F., Parker, S. C., & Mason, C. M. (2009). Public
policy support for the informal venture capital market in Europe:
a critical review. International Small Business Journal, 27(5),
536-556.
Sudek, R. (2006). Angel investment criteria. Journal of Small Business
Strategy, 17(2), 89.
Sun, Y., Kaplan, J. A., Shieh, A., Sun, H. L., Croce, C. M., Grinstaff, M. W.,
& Parquette, J. R. (2016). Self-assembly of a 5-fluorouracildipeptide
hydrogel. Chemical Communications, 52(30), 5254-5257.
Tenca, F., Croce, A., & Ughetto, E. (2018). Business angels research in
entrepreneurial finance: A literature review and a research
agenda. Journal of Economic Surveys, 32(5), 1384-1413.
Thiault, L., Marshall, P., Gelcich, S., Collin, A., Chlous, F., & Claudet, J.
(2018). Mapping social-ecological vulnerability to inform local
decision making. Conservation Biology, 32(2), 447-456.
Tuomi, K., & Harrison, R. T. (2017). A comparison of equity crowd
funding in four countries: Implications for business angels.
Strategic Change, 26(6), 609-615.
Ughetto, E., Cowling, M., & Lee, N. (2019). Regional and spatial issues
in the financing of small and medium-sized enterprises and new
ventures; London: Routledge.
White, B. A., & Dumay, J. (2017). Business Angels: a research review and
a new agenda. Venture Capital, 19(3), 183-216.
in business angels’ research: toward a consensus. Management
Decision, 55(2), 310-330.
Bessière, V., Stephany, E., & Wirtz, P. (2019). Crowdfunding, business
angels, and venture capital: an exploratory study of the concept
of the funding trajectory. Venture Capital, 1-26.
Block, J., Fisch, C., Vismara, S., & Andres, R. (2019). Private equity investment
criteria: An experimental conjoint analysis of venture capital, business
angels, and family offices. Journal of Corporate Finance.
Block, J. H., Fisch, C. O., Obschonka, M., & Sandner, P. G. (2019). A
personality perspective on business angel syndication. Journal
of Banking & Finance, 100, 306-327.
Bonini, S., Capizzi, V., Valletta, M., & Zocchi, P. (2018). Angel network
affiliation and business angels’ investment practices. Journal of
Corporate Finance, 50, 592-608.
Brettel, M. (2003). Business angels in Germany: a research note.
Brush, C. G., Edelman, L. F., & Manolova, T. S. (2012). Ready for
funding? Entrepreneurial ventures and the pursuit of angel
financing. Venture Capital, 14(2-3), 111-129.
Croce, A., Tenca, F., & Ughetto, E. (2016). How business angel groups
work and what rejection criteria in investment evaluation.
International Small Business Journal.
Croce, A., Tenca, F., & Ughetto, E. (2017). How business angel groups
work: rejection criteria in investment evaluation. International
Small Business Journal, 35(4), 405-426.
Feeney, L., Haines Jr, G. H., & Riding, A. L. (1999). Private investors’
investment criteria: insights from qualitative data. Venture
Capital: An international journal of entrepreneurial finance,
1(2), 121-145.
Firms, F. H. G. (2011). The Role of Angel Investors. Paris: OECD
Publishing.
Fisch, C. (2019). Initial coin offerings (ICOs) to finance new ventures.
Journal of Business Venturing, 34(1), 1-22.
Frani?, S., & Drnovšek, M. (2019). The role of regulatory focus and
cognitive style in business angels’ evaluation of an investment
opportunity. Venture Capital, 1-25.
Geibel, R., & Yang, J. (2018). Extended study on characterizing business
angels and their impact on start-up success. GSTF Journal on
Business Review (GBR), 5(1).
Grilli, L. (2019). There must be an angel? Local financial markets,
business angels and the financing of innovative start-ups.
Regional Studies, 53(5), 620-629.
Haar, N. E., Starr, J., & MacMillan, I. C. (1988). Informal risk capital
investors: investment patterns on the East Coast of the USA.
Journal of Business Venturing, 3(1), 11-29.
Haines Jr, G. H., Madill, J. J., & Riding, A. L. (2003). Informal investment
in Canada: financing small business growth. Journal of Small
Business & Entrepreneurship, 16(3-4), 13-40.
Hoyos-Iruarrizaga, J., Fernández-Sainz, A., & Saiz-Santos, M. (2017).
High value-added business angels at post-investment stages: Key
predictors. International Small Business Journal, 35(8), 949-968.
Hsu, D. K., Haynie, J. M., Simmons, S. A., & McKelvie, A. (2014). What
matters, matters differently: a conjoint analysis of the decision
policies of an angel and venture capital investors. Venture
Capital, 16(1), 1-25.
Kafeshani, A. A., Rezvani, M., Chitsazan, H., & Kazemi, R. M. (2018).
The Art of Fundraising from Business Angels Based on
Entrepreneurial Marketing: A New Insight. International Journal
of Entrepreneurship, 22(3), 1-10.
Kelly, P. (2007). 12 Business angel research: The road travelled and the
journey ahead, Handbook of research on venture capital, 1, 315.
Khan, Z., & Lew, Y. K. (2018). Post-entry survival of developing economy
international new ventures: A dynamic capability perspective.
International Business Review, 27(1), 149-160.
Landström, H. (1992). The relationship between private investors and
small firms: an agency theory approach. Entrepreneurship &
Regional Development, 4(3), 199-223.
Levratto, N., Tessier, L., & Fonrouge, C. (2018). Business performance
and angels presence: a fresh look from France 2008–2011. Small
Business Economics, 50(2), 339-356.
Mason, C., Botelho, T., & Zygmunt, J. (2017). Why do business angels
reject investment opportunities: Is it personal? International
Small Business Journal, 35(5), 519-534.
Mason, C., & Harrison, R. (1996). Why business angels’ say no: a case
study of opportunities rejected by an informal investor syndicate.
International Small Business Journal, 14(2), 35-51.
Mason, C., & Rogers, A. (1996). Understanding the business angel’s
investment decision: Univ. Southampton, Department of Geography.
Mason, C., & Rogers, A. (1997). The business angel’s investment decision:
An exploratory analysis. Paper presented at the National Small
Firms Policy and Research Conference.
Mason, C. M., Botelho, T., & Harrison, R. (2013). The transformation of
the business angel market: evidence from Scotland.
Mason, C. M., & Harrison, R. T. (1994). Informal venture capital in the UK.
Mason, C. M., & Harrison, R. T. (1996). Informal venture capital: a study
of the investment process, the post-investment experience and
investment performance. Entrepreneurship & Regional
Development, 8(2), 105-126.
Mason, C. M., & Harrison, R. T. (2015). Business angel investment
activity in the financial crisis: UK evidence and policy
implications. Environment and Planning C: Government and
Policy, 33(1), 43-60.
Maxwell, A. L., Jeffrey, S. A., & Lévesque, M. (2011). Business Angel’s
early-stage decision making. Journal of Business Venturing,
Mitteness, C. R., Baucus, M. S., & Sudek, R. (2012). Horse vs jockey?
How the stage of the funding process and industry experience
affect the evaluations of angel investors. Venture Capital, 14(4),
241-267.
Paul, S., Whittam, G., & Johnston, J. B. (2003). Operation of the informal
venture capital market in Scotland. Venture Capital, 5(4), 313-335.
Payne, J. W., Bettman, J. R., & Johnson, E. J. (1988). Adaptive strategy
selection in decision making. Journal of Experimental
Psychology: Learning, Memory, and Cognition, 14(3), 534.
Payne, J. W., Bettman, J. R., & Johnson, E. J. (1992). Behavioural decision
research: A constructive processing perspective. Annual Review
of Psychology, 43(1), 87-131.
Pedchenko, N., Strilec, V., Kolisnyk, G. M., Dykha, M. V., & Frolov, S.
(2018). Business angels as an alternative to financial support at
the early stages of small businesses’ life cycle.
Prohorovs, A., Fainglozs, L., & Solesvik, M. (2019). Measuring Activity
of Business Angels in Central and Eastern European Counties.
Paper presented at the Proceedings of 33rd IBIMA Conference.
Reitan, B., & Sorheim, R. (2000). The informal venture capital market in
Norway? Investor characteristics, behaviour and investment
preferences. Venture Capital: An International Journal of
Entrepreneurial Finance, 2(2), 129-141.
Riding, A., Duxbury, L., & Haines Jr, G. (1995). Financing enterprise
development: decision-making by Canadian angels. School of
Business, Carleton University, Ottawa.
Robson, P. J., Wijbenga, F., Parker, S. C., & Mason, C. M. (2009). Public
policy support for the informal venture capital market in Europe:
a critical review. International Small Business Journal, 27(5),
536-556.
Sudek, R. (2006). Angel investment criteria. Journal of Small Business
Strategy, 17(2), 89.
Sun, Y., Kaplan, J. A., Shieh, A., Sun, H. L., Croce, C. M., Grinstaff, M. W.,
& Parquette, J. R. (2016). Self-assembly of a 5-fluorouracildipeptide
hydrogel. Chemical Communications, 52(30), 5254-5257.
Tenca, F., Croce, A., & Ughetto, E. (2018). Business angels research in
entrepreneurial finance: A literature review and a research
agenda. Journal of Economic Surveys, 32(5), 1384-1413.
Thiault, L., Marshall, P., Gelcich, S., Collin, A., Chlous, F., & Claudet, J.
(2018). Mapping social-ecological vulnerability to inform local
decision making. Conservation Biology, 32(2), 447-456.
Tuomi, K., & Harrison, R. T. (2017). A comparison of equity crowd
funding in four countries: Implications for business angels.
Strategic Change, 26(6), 609-615.
Ughetto, E., Cowling, M., & Lee, N. (2019). Regional and spatial issues
in the financing of small and medium-sized enterprises and new
ventures; London: Routledge.
White, B. A., & Dumay, J. (2017). Business Angels: a research review and
a new agenda. Venture Capital, 19(3), 183-216.
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Published
2019-06-15
How to Cite
Iqbal, N., Mushtaque, D. T., & Shahzadi, I. (2019). BUSINESS ANGELS AND INVESTMENT REJECTION REASONS: A QUALITATIVE STUDY BY USING EXPLORATORY SEQUENTIAL MIXED METHOD. Journal of Business Strategies, 13(1), 161–182. Retrieved from https://greenwichjournals.com/index.php/businessstudies/article/view/329
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