Informal Investors as Financiers of Entrepreneurial Firms in Norway
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The overall objectives with this compound thesis, focusing on informal investors as financiers of entrepreneurial ventures, can be summarized in the following way: - To reveal the existence of, and describe the characteristics, investment activities, and preferences of Norwegian informal investors. - To refine the informal investor concept by developing a robust categorization of Norwegian informal investors. - To uncover how relational aspects influence the investment process of experienced informal investors. The core of the present thesis consists of four academic papers, employing data from two separate empirical studies. Paper 1, “The informal venture capital market in Norway – investor characteristics, behaviour and investment preferences”, is to a large extent a replication of previous studies in other geographical contexts. This paper suggests that Norwegian informal investors are quite similar to investors in the UK and Sweden, but there are differences, most notably the fact that Norwegian informal investors to a lesser degree are actively involved in their portfolio firms. Paper 2, “Informal investors – a categorization, with policy implications”, provides a categorization that is more robust, and hopefully more useful than categorizations in previous research; it has revealed the assumed heterogeneity among informal investors with four basic categories of investors: i) “Lotto Investors”, ii) “Traders”, iii) “Analytical Investors”, and iv) “Business Angels”. This categorization refines the informal investor concept and enhances the understanding of different categories of investors. This insight should then be used when introducing private and public means in order to stimulate the informal venture capital market. Paper 3, “The pre-investment behaviour of business angels – a social capital approach”, addresses why and how experienced informal investors can deal with the fragmented market place per se. As a result of this study I propose that very experienced investors find it less difficult to identify and evaluate investment proposals. This finding relates to the relational nature of the market, as it is the previous regional or industry specific track record that defines how informal investors handle the fragmented marketplace. Paper 4, “Business angels as facilitators for further finance – an exploratory study”, deals with how these investors can add value to their portfolio firm by acting as facilitators for further finance. The empirical findings from this study indicate that experienced informal investors play a key role as facilitators for further finance; usually not as we would expect, by involving venture capital firms, but more often by facilitating the involvement of other informal investors, strategic partners, and banks. Paper 3 and 4 employ theoretical insight from social capital theory, adapted in order to study the informal investors’ investment processes. In paper 3, I argue that an integrative social capital approach (including both a bridging and a bonding view of social capital) is very useful in order to explain how informal investors actually deal with the fragmented marketplace. Paper 4 also employs central elements from social capital theory, but to a larger extent it employs a bridging view of social capital when studying how informal investors can act as facilitators for further finance. Overall, insights from social capital theory seem to be relevant in order to uncover the social/relational aspects of informal investors investment process.