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Veroniek Collewaert

Business angels are active investors who create long-term relationships with the entrepreneurs in the ventures in which they invest. However, in-depth knowledge on how business angels and entrepreneurs work together to create an effective investment relationship is lacking. Nevertheless, we know that the business angel–entrepreneur relationship is not always ‘rosy’ – there is also a dark side of the relationship in which various kinds of conflicts can arise. The chapter elaborates on this issue by providing a review on our knowledge about the conditions, triggers, contingencies and outcomes of conflicts in the business angel–entrepreneur relationship. The author shows that both extremes – the absence of conflict and extremely high levels of conflict – are rare in the business angel–entrepreneur relationship. When conflicts do occur, the causes have many roots, from scarce resources, personal differences, to goal incompatibilities. The impact of a conflict could have performance-related outcomes as well as individual affect- and attitude-related outcomes. The author recognizes that not all conflicts are equally good or bad – rather, it depends on the type of conflicts that occur and various moderating influences such as team and task characteristics.

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Tom Lahti and Henrik Keinonen

The chapter focuses on an initiative that has become popular among policy-makers around the world in order to foster business angel activities, namely, business angel networks (BANs). BANs have been established to increase the transparency and improve the efficiency of the business angel market by providing a channel of communication that enables entrepreneurs seeking finance to come into contact with business angels, and at the same time enable business angels to receive information on investment opportunities without the need to compromise their anonymity if so desired. The authors describe the development of BAN activities in different countries and evaluate their benefits and drawbacks. The chapter identifies different kinds of BANs and the different ways that BANs can provide their deal-brokering service and deliver supplementary functions such as training of entrepreneurs and business angels, advisory service, contract templates and the development of good practice. Evaluations of BANs have shown both positive impacts on investment activity as well as negative effects, hence there is no conclusive answer to whether there is a need for public sector interventions to support the establishment and operation of BANs.

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Hans Landström and Colin Mason

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Diamanto Politis

Business angels are regarded as ‘smart’ investors who make added value contributions to their investee businesses that go beyond their financial investments. Most studies of the value added process provide empirical descriptions of the hands-on support provided by business angels. Consequently, a more comprehensive and theoretical overview of the process is lacking and theoretical progress remains slow. In the chapter the author provides a review and synthesis of the available research evidence on the hands-on involvement of business angels after they have made their investment. The analysis is based on a framework that comprises four interrelated dimensions of the value added process: behaviour, context, reception and impact. This results in three main themes that provide insights into the process of adding value. The first theme addresses the involvement of business angels in the ventures in which they invest and how this involvement translates into a set of potential value adding benefits. The second theme addresses how and to what extent the set of potential benefits that portfolio ventures receive may translate into benefits in the venture development process. The third theme addresses how situational contingencies may influence the value added of business angels.

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Jiani Wang, Yi Tan and Manhong Liu

The chapter elaborates on the business angel (BA) market in China, which has developed significantly since its emergence at the end of the 1990s. The increasing numbers of successful cashed-out entrepreneurs emerging from the Internet and high-tech has resulted in the emergence of angel investment. Currently, there are numerous angel groups and matchmaking services that have served to enhance the market. The authors show that the investment behavior of Chinese BAs is very similar to that in western countries, but Chinese BAs are younger, invest more infrequently and lack an understanding of BA investing. The authors also emphasize the need to understand the role of the government in the BA market in improving the regulation and environment of BA investments.

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Gianni Romaní and Miguel Atienza

The chapter discusses the emergent business angel markets in Latin America – comprising a heterogeneous group of countries, the largest of which are Argentina, Brazil, Chile, Colombia and Mexico. These countries are increasingly aware of the importance of entrepreneurship as engines of economic development. Most Latin American governments are fostering a series of policies to encourage entrepreneurship and innovation, including the creation of business angel networks (BANs). At the same time, wealthy individuals are starting to invest in entrepreneurial ventures. However, the authors show that the business angel markets in Latin America are still incipient, and its development is influenced by the experience of successful companies in the United States such as Amazon and Google, which were initially funded by business angel investors. In some Latin American countries, the progress of the business angel market has had significant support from public policies and multilateral organizations. Changes in the institutional frameworks during the last decade have contributed to greater political and economic stability. Nevertheless, the region has not yet a critical mass of business angels. There are several remaining obstacles for the progress of the business angel markets. For example, cultural issues, such as a lack of trust, make the relationship between entrepreneurs and business angels insecure. A lack of long-term vision and a risk aversion among Latin American investors and institutional obstacles such as a lack of clarity in defining the rules of the game represent further barriers.

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William Scheela

Southeast Asia, which includes the emerging economies of Brunei, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Thailand and Vietnam as well as the developed economy of Singapore, represents one of the most rapidly growing regions globally. Entrepreneurship has played a major role in this impressive growth. According to the Global Entrepreneurship Monitor, the population of these countries shows an above average intention to become entrepreneurs. But in spite of impressive economic growth and entrepreneurial activity, there have been very few studies on the impact of business angel (BA) financing. This lack of research arises because many BAs operate in the informal economy and hence prefer a low profile, making them even more invisible compared to their Western counterparts. In the chapter the author reviews the studies that have been conducted on the BA markets in Southeast Asia. He argues that BAs in Southeast Asia exhibit differences as well as similarities to their counterparts in Western economies. There are apparent similarities as most BAs are experienced and hands-on investors, actively use their networks and co-invest with other BAs. However, there are obvious differences, notably in terms of the absence of a fully developed institutional framework to support BA investing. Singapore is the exception in this respect with a business environment supported by well-developed institutions. The response of many BAs is to focus more strongly on family relationships, and be more socially focused in their investment strategy. An additional issue raised by the author is the definition of BAs. The traditional way of defining a BA seems to fit, except in Thailand and for the Chinese Filipinos who make what are more family-like investments. This raises concerns about the definition of a BA in studies that are conduced outside Western countries.

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David Lingelbach

Definitional concerns are an issue when researching business angels in sub-Saharan Africa. In the chapter the author focuses on this subject in his review of our knowledge of business angels in sub-Saharan Africa. He emphasizes the need to consider the institutional context and the heterogeneity between countries as well as the differences from Western countries. He argues that the recent increase in gross domestic product growth in several African economies, combined with a slow reduction in the level of violence, has contributed to an increase in entrepreneurial activity and, as a consequence, we can expect an increase in business angel investments. However, these activities will not mimic the behavior of BAs in developed economies, but will evolve a practice that is suited to local conditions. National levels of business angel investing activity are likely to continue to vary, influenced by formal and informal institutions.

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Roger Sørheim and Tiago Botelho

Previous studies of business angels have shown that the population is very heterogeneous, with various studies developing typologies to describe different categories of investor. This chapter provides a critical review of previous research on business angel categorisations to highlight the key contributions. The authors note that previous studies have categorised business angels using a wide range of variables, mostly grouping investors according to investors’ characteristics and often derived from data rather than theory. The main contribution of these studies has been to develop a more sophisticated and nuanced view of the definition and behaviour of business angels – which breaks free from an oversimplified stereotypical view of business angels. However, in many cases the categorisations are fragmented, lacking a theoretical anchor, supply-side driven and rather static. The authors conclude that these studies have not significantly influenced policymakers and policies to target different categories of business angel.

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Lars Hornuf and Armin Schwienbacher

The chapter reviews knowledge of crowdinvesting (or equity crowdfunding). Crowdfunding has emerged over the past decade as a new and promising means of financing new ventures. Crowdfunding includes a broad range of activities, such as donations, pre-purchase and other reward-based forms of funding by the crowd as well as debt and equity financing. The authors focus on a sub-category of crowdfunding that can be defined as ‘crowdinvesting’ – Internet-based investment in new ventures by the crowd with the intention to obtain some residual claim on future cash flow of a venture. As a new development in the market it raises questions regarding the boundaries between crowdinvestors and business angels. The aims of the chapter are to describe the function of crowdinvesting and to analyze the similarities and differences between crowdinvesting and angel investing. The authors argue that in many cases, crowdinvestors are likely to complement rather than substitute business angels and venture capital funds.