Valuation of Angel‐Backed Companies: The Role of Investor Human Capital

Veroniek Collewaert and Sophie Manigart

Journal of Small Business Management, 2016, vol. 54, issue 1, 356-372

Abstract: This article examines how angel investors' human capital affects the valuation of their portfolio companies, based on the pre‐money valuation of 123 investment rounds in 58 elgian companies. We argue that angel investors with higher levels of human capital will perceive a higher value‐creating potential in entrepreneurial opportunities through their ability to see more value‐creating options, a higher value‐adding potential post‐investment, and an enhanced legitimacy provided to the venture. Economic theories suggest they appropriate these rents through lower valuations, whereas stewardship theory suggests they share value creation with entrepreneurs. Consistent with stewardship theory, we show angel investors negotiate higher valuations when they have higher levels of human capital, more specifically if they studied longer, have a business degree, more entrepreneurial experience, or previous professional law experience. As such, our results contrast with the behavior of venture capital investors who negotiate lower valuations when they have more experience.

Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1111/jsbm.12150 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:ujbmxx:v:54:y:2016:i:1:p:356-372

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/ujbm20

DOI: 10.1111/jsbm.12150

Access Statistics for this article

Journal of Small Business Management is currently edited by Eric Liguori

More articles in Journal of Small Business Management from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().