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This paper provides a detailed comparison of the investment criteria and procedures of business angels (BAs) and venture capitalists (VCs) across the full investment process. To make the study more robust, a theoretical base is adopted (based on agency theory) to form research hypotheses which propose that BAs and VCs in the UK may use different approaches to limit potential agency risks in their investments (i.e. the risks associated with an entrepreneur's potential misuse of the investor's money). Utilizing data from 40 personal interviews and 262 questionnaire responses, this study empirically supports the main hypothesized notion that, although both investors reduce agency risks at all stages of the investment process, BAs place more emphasis on doing so ex post investment (the incomplete contracts approach), while VCs stress doing so more ex ante investment (the principal-agent approach).
Mark Van Osnabrugge (Sat,) studied this question.