Angel Investors’ Selection Criteria : A Comparative Institutional Perspective

Despite the important role of angel investors as critical financial providers for new ventures, little is known regarding how the institutions present in very different institutional environments impact their investment decisions. While angel investors might be expected to make decisions based on similar selection criteria, they are also embedded within and affected by different institutional settings in which they invest, and as a result they give these criteria weights that are different than those of other investors. We compare angel investors' selection criteria in China and Denmark utilizing a comparative institutional perspective. Utilizing a policy-capturing approach to understanding their decision criteria, we find that angel investors in China are embedded within relationship-based institutions, and tend to rely more on strong ties such as family and friends in the management team. They also give risks less weight as compared with angel investors in Denmark, which operate within more rule-based institutional contexts. As with venture capitalists, angel investors modify their decision criteria to fit the local institutional conditions