Paul: towards a model of business angel investment process
7 important questions on Paul: towards a model of business angel investment process
Familiarization stage, has two main activities
- Learning about opportunity (angels prefer short business plan)
- Meeting entrepreneur
Although we have proposed 5 stage model, it would be wrong to see process as fitting. In practice, stages overlap.
Two mechanisms can be identified which drive forward the angel investment process
- personal nature of the process
- activity of assessment
Figure: model of angel investment process
- demonstrates possibility of a backward step as an agreement is being formulated
- Angels often have little information
- any new information or unexpected event can cause angel to reassess his position
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Iteration is a defining characteristic of the angel process. The main iterative loop spans three stages, and there are two more:
- Familiarization
- Screening
- Bargaining
- Managing
- Harvesting
To describe angel investement as orderly, would be simplistic. Many deals do not progress smoothly, number of factors
- Internal factors: angel can get cold feet
- External factors
In reaching a decission, an angel must balance risk and reward. An angel will be faced with a choice, characterized by
- Conflict: may arise over the finer point of the agreement
- Uncertainty: may surface where doubts persist about ability of entrepreneur behind the business.
- Complexity: may be increased where angel considered more then one investment opportunity
Ruhnka's Living Dead Investment
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