Startups Seeking Business Angel Financing - From the Entrepreneur's Perspective

Abstract

In this master thesis we have performed an explorative study on the business angel-entrepreneur relationship to investigate how entrepreneurs secure investment from business angels (BAs). Through a literature review of the BA literature and the relationship initiation literature followed by a multiple case study of six technology-based startups, we have outlined key findings regarding current gaps in previous literature and analysed empirical findings on the BA-entrepreneur relationship through a suggested framework which combine the two literature streams. Our main findings from the literature review are that there has been limited research regarding the perspective of the entrepreneur in the process of obtaining external BA funding and a lack of understanding on the BA-entrepreneur relationship and the factors facilitating the initiation process. Therefore, the pre-investment process between entrepreneurs and BAs was researched through the lens of relationship initiation to get a relational perspective of the process, which resulted in a proposed conceptual framework to investigate the initiation process. The framework was further used in an empirical study to research the entrepreneur s perspective on the relationship initiation process with BAs and the key facilitators which triggers the relationship to move forward, as well as the challenges entrepreneurs face when acquiring BA funding. Key findings suggest that the BA-entrepreneur relationship is relevant in the process of initiation, as it is characterized by high levels of uncertainty and trust. By taking a more relation perspective to the process of initiation, rather than the previous transactional perspective, entrepreneurs can build trust and hence reduce uncertainty through their network, reputation and relationship building. The findings of this study contributes to the under-investigated demand for capital by giving further insights into 1) the initiation of BA-entrepreneur relationship, 2) how trust is built early on and how social capital can provide the foundation of trust in the initiation of relationship, and 3) the entrepreneur s perspective on how a successful BA-entrepreneur relationship can be initiated at an early stage of a funding process. The thesis further gives concluding remarks, and suggest implications for entrepreneurs and further research.