The Role Angel Investors in the Assembly of Non-Financial Resources of New Ventures: Conceptual Framework and Empirical Evidence

This study investigated the types of non-financial resources that private investors contribute to fledgling businesses, and reasons for providing these resources. The study is grounded in the resource-based theory of the firm (Penrose, 1959; Rumelt, 1984), and agency theory (Jensen and Meckling, 1976). In-depth interviews were conducted with 27 serial angel investors. Results documented in detail the types of non-financial resources that angels provide to new firms, including business ideas, top managers and network connections - as well as funds. We demonstrate that angles manage risk through a combination of techniques, which has as much to do with managing returns for the business as with managing agency risk. We also describe in detail distinct patterns of investment behavior among private investors, ranging from the dominant pattern of "partnership" with entrepreneurs to the rarer pattern of "passive" investing. Differences in patterns of investment behaviour appear to have significant implications for entrepreneurs seeking startup support from private investors. This study provides a starting point for development of a theory of resource provision and assembly for new firms.