Oceňování 2024, 17(2):3-26 | DOI: 10.18267/j.ocenovani.294

Angel investor decision-making about investing in a startup: The key role of founder characteristics

Vít Paclík, Pavel Svačinaa
a Vysoká škola ekonomická v Praze, Katedra financí a oceňování podniku

Does an early-stage startup have future potential or not? This is a question that many investors or start-up appraisers ask themselves. A qualified answer to this question can be obtained by learning how and why experienced business angel investors, who are those who invest substantial sums in early-stage start-ups, make empirical decisions. In this article, we identify the key signals that are decisive for Mr. Jiří Hlavenka, a experienced Czech angel investor in IT sector with a history of more than 50 invested start-ups and several thousand analyzed investment opportunities. The results show that the angel investor’s decision is primarily a “bet on people” – his decision to invest in an early-stage start-up is most influenced by the specific set of skills and abilities of the founder(s), namely: (i) the ability to execute a business, (ii) being a good leader, (iii) being a good merchant, (iv) ability to build a team, (v) all-round versatility, (vi) carrying a strong vision. The findings of this article may be of interest, among other things, to appraisers, investors who estimate the future potential of new start-ups, or start-up founders who use the investments themselves in the early stages of their business.

Keywords: Business angel; Angel investor; Start-up success; Start-up founder; Valuation of start-ups
Grants and funding:

Článek je zpracován jako jeden z výstupů financovaných z prostředků Institucionální podpory Fakulty financí a účetnictví, VŠE v Praze, ev. č. IP100040.

JEL classification: D81, M13, M21, O16

Published: March 20, 2025  Show citation

ACS AIP APA ASA Harvard Chicago Chicago Notes IEEE ISO690 MLA NLM Turabian Vancouver
Paclík, V., & Svačina, P. (2024). Angel investor decision-making about investing in a startup: The key role of founder characteristics. Oceňování, 17(2), 3-26. doi: 10.18267/j.ocenovani.294
Share...
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. [1] Aryadita, H., Sukoco, B. M., & Lyver, M. (2023). Founders and the success of start-ups: An integrative review. Cogent Business & Management, 10(3), 2284451. Go to original source...
    2. [2] Ahtila, O.-P. (2014). Business angel investment decision-making criteria. https://aaltodoc.aalto.fi/handle/123456789/14596
    3. [3] Almakenzi, S., Bramantoro, A., & Rashideh, W. M. (2015). A survivability model for Saudi ICT start-ups. International Journal of Computer Science & Information Technology, 7(2), 145-157. https://doi.org/10.5121/ijcsit.2015.7213 Go to original source...
    4. [4] Aryadita, H., Sukoco, B. M., & Lyver, M. (2023). Founders and the success of start-ups: An integrative review. Cogent Business & Management, 10(3), 2284451. https://doi.org/10.1080/23311975.2023.2284451 Go to original source...
    5. [5] Baumgartner, M. (2013). Detecting Causal Chains in Small-n Data. Field Methods, 25(1), 3-24. https://doi.org/10.1177/1525822X12462527 Go to original source...
    6. [6] Baumgartner, M., & Ambühl, M. (2020). Causal modeling with multi-value and fuzzy-set Coincidence Analysis. Political Science Research and Methods, 8(3), 526-542. https://doi.org/10.1017/psrm.2018.45 Go to original source...
    7. [7] Ben-Ari, G., & Vonortas, N. S. (2007). Risk financing for knowledge-based enterprises: Mechanisms and policy options. Science and Public Policy, 34(7), 475-488. Go to original source...
    8. [8] Blank, S. (2020). The Four Steps to the Epiphany: Successful Strategies for Products that Win (5. vyd.). John Wiley & Sons.
    9. [9] Block, J. H., Fisch, C., & Diegel, W. (2022). Schumpeterian entrepreneurial digital identity and funding from venture capital firms. The Journal of Technology Transfer. https://doi.org/10.1007/s10961-022-09973-7 Go to original source...
    10. [10] Bocken, N. M. P. (2015). Sustainable venture capital - catalyst for sustainable start-up success? Journal of Cleaner Production, 108, Part A, 647-658. https://doi.org/10.1016/j.jclepro.2015.05.079 Go to original source...
    11. [11] Brandenburger, M., Frank, G., Presse, A., & Terzidis, O. (2013). Business Angels Decision Criteria in New Ventures in the Seed and Early Stage Phase. Entrepreneurship Research-Discussing Today the Awareness of Tomorrow, 33.
    12. [12] Cassar, G., & Friedman, H. (2009). Does self-efficacy affect entrepreneurial investment? Strategic Entrepreneurship Journal, 3(3), 241-260. https://doi.org/10.1002/sej.73 Go to original source...
    13. [13] Clark, C. (2008). The impact of entrepreneurs' oral 'pitch' presentation skills on business angels' initial screening investment decisions. Venture Capital, 10(3), 257-279. https://doi.org/10.1080/13691060802151945 Go to original source...
    14. [14] Colombo, M. G., & Grilli, L. (2007). Young firm growth in high-tech sectors: The role of founders' human capital. In U. Cantner & F. Malerba (Ed.), Innovation, Industrial Dynamics and Structural Transformation (s. 67-86). Springer Berlin Heidelberg. https://doi.org/10.1007/978-3-540-49465-2_5 Go to original source...
    15. [15] Davidson, M. (2023). Evolution of the Start-up Founder: Shifts in Delegation. https://deepblue.lib.umich.edu/handle/2027.42/176236
    16. [16] Delmar, F., & Shane, S. (2006). Does experience matter? The effect of founding team experience on the survival and sales of newly founded ventures. Strategic Organization, 4(3), 215-247. https://doi.org/10.1177/1476127006066596 Go to original source...
    17. [17] Deutsch, W., & Wortmann, C. (2011a). Entrepreneurial selling. Chicago, IL: Polsky Center for Entrepreneurship. https://www.entrepreneurship.org/wp-content/uploads/sites/7/2016/08/EshipSelling_SubTop1_Readings_EntrepreneurialSellingArticle.pdf
    18. [18] Deutsch, W., & Wortmann, C. (2011b). Entrepreneurial selling. Chicago, IL: Polsky Center for Entrepreneurship. https://www.entrepreneurship.org/wp-content/uploads/sites/7/2016/08/EshipSelling_SubTop1_Readings_EntrepreneurialSellingArticle.pdf
    19. [19] Drover, W., Busenitz, L., Matusik, S., Townsend, D., Anglin, A., & Dushnitsky, G. (2017). A Review and Road Map of Entrepreneurial Equity Financing Research: Venture Capital, Corporate Venture Capital, Angel Investment, Crowdfunding, and Accelerators. Journal of Management, 43(6), 1820-1853. https://doi.org/10.1177/0149206317690584 Go to original source...
    20. [20] EBAN. (2022). Statistics Compendium 2021 European Early Stage Market Statistics. https://www.eban.org/statistics-compendium-2021-european-early-stage-market-statistics/
    21. [21] Eesley, D. T., Sharma, Y., Singh, R., & Sindhav, B. (2023). Customer development-product development dilemmas in startup firms: A qualitative investigation into founder's involvement. Journal of Research in Marketing and Entrepreneurship. https://www.emerald.com/insight/content/doi/10.1108/JRME-02-2022-0014/full/html Go to original source...
    22. [22] Ensley, M. D., Hmieleski, K. M., & Pearce, C. L. (2006). The importance of vertical and shared leadership within new venture top management teams: Implications for the performance of startups. The leadership quarterly, 17(3), 217-231. Go to original source...
    23. [23] Franco, S., Cappa, F., & Pinelli, M. (2021). Founder education and start-up funds raised. IEEE Engineering Management Review, 49(3), 42-48. Go to original source...
    24. [24] Franke, N., Gruber, M., Harhoff, D., & Henkel, J. (2008). Venture Capitalists' Evaluations of Start-Up Teams: Trade-Offs, Knock-Out Criteria, and the Impact of VC Experience. Entrepreneurship Theory and Practice, 32(3), 459-483. https://doi.org/10.1111/j.1540-6520.2008.00236.x Go to original source...
    25. [25] Freeman, D., & Siegfried, R. L. (2015). Entrepreneurial Leadership in the Context of Company Start-Up and Growth. Journal of Leadership Studies, 8(4), 35-39. https://doi.org/10.1002/jls.21351 Go to original source...
    26. [26] Gelderen, M. V., Thurik, R., & Bosma, N. (2005). Success and Risk Factors in the Pre-Startup Phase. Small Business Economics, 24(4), 365-380. https://doi.org/10.1007/s11187-004-6994-6 Go to original source...
    27. [27] George, A. L., & Bennett, A. (2005). Case studies and theory development in the social sciences. MIT Press.
    28. [28] Gerring, J. (2004). What Is a Case Study and What Is It Good for? The American Political Science Review, 98(2), 341-354. Go to original source...
    29. [29] Gimmon, E., & Levie, J. (2010). Founder's human capital, external investment, and the survival of new high-technology ventures. Research Policy, 39(9), 1214-1226. Go to original source...
    30. [30] Henrekson, M., & Sanandaji, T. (2018). Stock option taxation and venture capital activity: A cross-country study. Venture Capital, 20(1), 51-71. https://doi.org/10.1080/13691066.2017.1400159 Go to original source...
    31. [31] Honjo, Y., Kato, M., & Okamuro, H. (2014). R&D investment of start-up firms: Does founders' human capital matter? Small Business Economics, 42(2), 207-220. https://doi.org/10.1007/s11187-013-9476-x Go to original source...
    32. [32] Hu, A., & Ma, S. (2021). Persuading investors: A video-based study. National Bureau of Economic Research. https://www.nber.org/papers/w29048
    33. [33] Chen, X.-P., Yao, X., & Kotha, S. (2009). Entrepreneur Passion And Preparedness In Business Plan Presentations: A Persuasion Analysis Of Venture Capitalists' Funding Decisions. Academy of Management Journal, 52(1), 199-214. https://doi.org/10.5465/amj.2009.36462018 Go to original source...
    34. [34] Chorev, S., & Anderson, A. R. (2006). Success in Israeli high-tech start-ups; Critical factors and process. Technovation, 26(2), 162-174. Go to original source...
    35. [35] Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure. In K. Brunner (Ed.), Economics Social Institutions (Roč. 1, s. 163-231). Springer Netherlands. https://doi.org/10.1007/978-94-009-9257-3_8 Go to original source...
    36. [36] Kalyanasundaram, G. (2018). Why Do Startups Fail? A Case Study Based Empirical Analysis in Bangalore. Asian Journal of Innovation & Policy, 7(1). https://www.researchgate.net/profile/Ganesaraman-Kalyanasundaram/publication/325011454_Why_Do_Startups_Fail_A_Case_Study_Based_Empirical_Analysis_in_Bangalore/links/5af15e610f7e9ba366456773/Why-Do-Startups-Fail-A-Case-Study-Based-Empirical-Analysis-in-Bangalore.pdf
    37. [37] Kazanjian, R. K. (1988). Relation of Dominant Problems to Stages of Growth in Technology-Based New Ventures. The Academy of Management Journal, 31(2), 257-279. JSTOR. https://doi.org/10.2307/256548 Go to original source...
    38. [38] Kirsch, D., Goldfarb, B., & Gera, A. (2009). Form or substance: The role of business plans in venture capital decision making. Strategic Management Journal, 30(5), 487-515. https://doi.org/10.1002/smj.751 Go to original source...
    39. [39] Kizilkan, K. (2024, leden 24). 205 Startup Statistics: Trends, Rates, Funding, and Teams. Flair Blog for HR Professionals. https://flair.hr/en/blog/startup-statistics/
    40. [40] Levie, J., & Gimmon, E. (2008). Mixed signals: Why investors may misjudge first time high technology venture founders. Venture Capital, 10(3), 233-256. https://doi.org/10.1080/13691060802151820 Go to original source...
    41. [41] Marmer, M., Herrmann, B. L., Dogrultan, E., & Berman, R. (2012). Startup Genome Report Extra on Premature Scaling (s. 59). Yellow Pages. https://yp.sg/wp-content/uploads/2017/04/StartupGenomeReport2_Why_Startups_Fail_v2.pdf
    42. [42] Mason, C., Botelho, T., & Zygmunt, J. (2017). Why business angels reject investment opportunities: Is it personal? International Small Business Journal: Researching Entrepreneurship, 35(5), 519-534. https://doi.org/10.1177/0266242616646622 Go to original source...
    43. [43] Mayer, J. D., Salovey, P., Caruso, D. R., & Cherkasskiy, L. (2011). Emotional intelligence. Cambridge University Press. https://psycnet.apa.org/record/2011-12794-026 Go to original source...
    44. [44] Mitteness, C. R., Baucus, M. S., & Sudek, R. (2012). Horse vs. Jockey? How stage of funding process and industry experience affect the evaluations of angel investors. Venture Capital, 14(4), 241-267. https://doi.org/10.1080/13691066.2012.689474 Go to original source...
    45. [45] Murnieks, C. Y., Sudek, R., & Wiltbank, R. (2015). The Role of Personality in Angel Investing. The International Journal of Entrepreneurship and Innovation, 16(1), 19-31. https://doi.org/10.5367/ijei.2015.0171 Go to original source...
    46. [46] Muzyka, D., Birley, S., & Leleux, B. (1996). Trade-offs in the investment decisons of European venture capitalists. Journal of business venturing, 11(4), 273-287. Go to original source...
    47. [47] Novák, M. (2023). Explaining the Success of a Young Gaming Start-up: A Case Study of Warhorse Studios [Disertační práce, Vysoká škola ekonomická v Praze]. https://theses.cz/id/3femb1/
    48. [48] Paclík, V. (2024, červen 5). Rozhodování business angela o investici do start-upu: Klíčová role charakteristik zakladatelů. Vysoká škola ekonomická v Praze, Fakulta financí a účetnictví, Katedra financí a oceňování podniku; Praha, diplomová práce (Ing.).
    49. [49] Patzelt, H., Preller, R., & Breugst, N. (2021). Understanding the Life Cycles of Entrepreneurial Teams and Their Ventures: An Agenda for Future Research. Entrepreneurship Theory and Practice, 45(5), 1119-1153. https://doi.org/10.1177/1042258720978386 Go to original source...
    50. [50] Picken, J. C. (2017). From startup to scalable enterprise: Laying the foundation. Business Horizons, 60(5), 587-595. Go to original source...
    51. [51] Picken, J. C. (2017a). From startup to scalable enterprise: Laying the foundation. Business Horizons, 60(5), 587-595. Go to original source...
    52. [52] Pinelli, M., Cappa, F., Franco, S., Peruffo, E., & Oriani, R. (2020). Too much of two good things: Effects of founders' educational level and heterogeneity on start-up funds raised. IEEE Transactions on Engineering Management, 69(4), 1502-1516. Go to original source...
    53. [53] Politis, D. (2008). Business angels and value added: What do we know and where do we go? Venture Capital, 10(2), 127-147. https://doi.org/10.1080/13691060801946147 Go to original source...
    54. [54] Prasad, K. V., Ehrhardt, K., Liu, Y., & Tiwari, K. (2015). Examining the age-performance relationship for entrepreneurs: Does the innovativeness of a venture make a difference? New England Journal of Entrepreneurship, 18(1), 41-57. Go to original source...
    55. [55] Prohorovs, A., Bistrova, J., & Ten, D. (2019). Startup Success Factors in the Capital Attraction Stage: Founders' Perspective. Journal of East-West Business, 25(1), 26-51. https://doi.org/10.1080/10669868.2018.1503211 Go to original source...
    56. [56] Ramsinghani, M. (2014). The Business of Venture Capital: Insights from Leading Practitioners on the Art of Raising a Fund, Deal Structuring, Value Creation, and Exit Strategies. John Wiley & Sons. Go to original source...
    57. [57] Ries, E. (2011). The Lean Startup (1. vyd.). Random House.
    58. [58] Roberts, E. B. (1968). Entrepreneurship and Technology: A basic study of innovators; how to keep and capitalize on their talents. Research Management, 11(4), 249-266. https://doi.org/10.1080/00345334.1968.11755911 Go to original source...
    59. [59] Rucker, D. D., & Petty, R. E. (2006). Increasing the Effectiveness of Communications to Consumers: Recommendations Based on Elaboration Likelihood and Attitude Certainty Perspectives. Journal of Public Policy & Marketing, 25(1), 39-52. https://doi.org/10.1509/jppm.25.1.39 Go to original source...
    60. [60] Santisteban, J., & Mauricio, D. (2017). Systematic literature review of critical success factors of information technology startups. Academy of Entrepreneurship Journal, 23(2), 1-23.
    61. [61] Seppänen, P. (2020). Yes, We Can! Building a Capable Initial Team for a Software Startup. In A. Nguyen-Duc, J. Münch, R. Prikladnicki, X. Wang, & P. Abrahamsson (Ed.), Fundamentals of Software Startups (s. 45-59). Springer International Publishing. https://doi.org/10.1007/978-3-030-35983-6_3 Go to original source...
    62. [62] Shane, S., Drover, W., Clingingsmith, D., & Cerf, M. (2020). Founder passion, neural engagement and informal investor interest in startup pitches: An fMRI study. Journal of Business Venturing, 35(4), 105949. https://doi.org/10.1016/j.jbusvent.2019.105949 Go to original source...
    63. [63] Skalicka, M., Zinecker, M., Balcerzak, A. P., & Pietrzak, M. B. (2023). Business angels and early stage decision making criteria: Empirical evidence from an emerging market. Economic research-Ekonomska istraživanja, 36(1), 25-50. Go to original source...
    64. [64] Slávik, Š., Hagarová, R., Ljudvigová, I., & Zagoršek, B. (2019). Business model and team as preconditions of a start-up viability. Entrepreneurship and Sustainability Issues, 6(3), 1404. Go to original source...
    65. [65] Spence, M. (1973). Job Market Signaling. The Quarterly Journal of Economics, 87(3), 355-374. https://doi.org/10.2307/1882010 Go to original source...
    66. [66] Sudek, R. (2006). Angel investment criteria. Journal of Small Business Strategy (archive only), 17(2), 89-104.
    67. [67] Thompson, R. A., Connell, J. P., & Bridges, L. J. (1988). Temperament, Emotion, and Social Interactive Behavior in the Strange Situation: A Component Process Analysis of Attachment System Functioning. Child Development, 59(4), 1102-1110. https://doi.org/10.2307/1130277 Go to original source...
    68. [68] Van Praag, C. M. (2003). Business Survival and Success of Young Small Business Owners. Small Business Economics, 21(1), 1-17. https://doi.org/10.1023/A:1024453200297 Go to original source...
    69. [69] Zaech, S., & Baldegger, U. (2017). Leadership in start-ups. International Small Business Journal: Researching Entrepreneurship, 35(2), 157-177. https://doi.org/10.1177/0266242616676883 Go to original source...

    This is an open access article distributed under the terms of the Creative Commons Attribution 4.0 International License (CC BY 4.0), which permits use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content