Angel Investing: A Literature Review

Edelman, Linda F.; Manolova, Tatiana S.; Brush, Candida G.

doi:10.1561/0300000051

Cited by 36 publications

(28 citation statements)

References 12 publications

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“…The same is true for approximately two fifths of IPOs in China (Guo et al 2015). Moreover, VC funding is estimated to be about twice the size of funding provided by angel investors in the USA (Edelman et al 2017).…”

Section: The Use Of Stock Options In Innovation Financementioning

confidence: 80%

Stock option taxation: a missing piece in European innovation policy?

Henrekson

Sanandaji

2018

Small Bus Econ

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Europe continues to lag behind the USA in venture capital (VC) activity and in the creation of successful startups, and has recently been surpassed by China. This is despite the fact that many European countries have deep financial markets, strong legal institutions, and high R&D spending. We point to the tax treatment of employee stock options as an explanation for the stronger growth of the US VC sector. As a response to high uncertainty and transaction costs, VC financiers have developed a model in which founders and key recruitments are compensated with stock options under complex contracts. Low tax rates on employee stock options further raise the relative returns of working and investing in innovative entrepreneurial firms, and shift financial capital and talent to that sector. We measure the effective tax on stock options in VCbacked entrepreneurial firms in a number of developed economies. Countries with lower stock option taxation have higher VC activity and more high-growth expectation entrepreneurial activity. Based on these associations and the theoretical and empirical literature, we argue that more lenient taxation of gains on employee stock options can be a strategy for European countries to catch up in entrepreneurial finance. This tax policy would narrowly target entrepreneurial startups without requiring broad tax cuts. The favorable tax treatment of stock options allows the state to promote firms that rely on entrepreneurial finance and make use of these types of contracts without lowering taxes for other sectors of the economy.

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Section: The Use Of Stock Options In Innovation Financementioning

confidence: 80%

Stock option taxation: a missing piece in European innovation policy?

Henrekson

Sanandaji

2018

Small Bus Econ

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“…These papers serve two purposes: they offer overviews of research to date in particular topic domains, both wellestablished (e.g., venture capital, business angels, private equity) and more recent (e.g., crowdfunding, policy analysis), and they provide suggestions as to how the research agenda in each of these topic areas might evolve. As such they are complementary to other recent and more conventional literature reviews of the entrepreneurial finance field (Wallmeroth, Wirtz, and Groh 2018;Edelman, Manolova, and Brush 2017;White and Dumay 2017;Drover et al 2017).…”

Section: The Evolution Of the Journalmentioning

confidence: 88%

Venture Capital 20 years on: reflections on the evolution of a field

Harrison

Mason

2019

Venture Capital

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This paper reviews the circumstances surrounding the launch of Venture Capital: An International Journal of Entrepreneurial Finance in 1999. It highlights a number of significant changes in the structure of the entrepreneurial finance market over the past 20 years, notably the decline of "classic" venture capital, the effective closure of the small-cap IPO market, the scale-up problem and the emergence of a second equity gap, the geographical dispersion of venture capital and the institutionalisation of the business angel market. A number of new players in the marketcoinvestment schemes, equity crowdfunding platforms and blockchain technology-based Initial Coin Offeringsare discussed and the challenges and opportunities they pose for investors, entrepreneurs, policy makers, regulators and academic researchers are assessed. Against this background, a number of key features of the evolution of the content and focus of the Journal are discussed. The paper finishes with a summary of the papers included in this Special Issue.

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“…DeTienne 2010; Wennberg et al 2010; DeTienne and Cardon 2012; Wennberg and DeTienne 2014) has taken an entrepreneur-centric perspective and ignored investor exits. And, as recent reviews of the business angel literature indicate, there have been few studies of the exit stage in the investment process (Edelman et al 2017;Wallmeroth et al 2018;Tenca et al 2018), with these studies largely focused on investment returns (Mason and Harrison 2002;Wiltbank and Boeker 2007;Wiltbank 2009;Wiltbank et al 2009;McDonald and DeGennaro 2016;Gregson et al 2017). However, the process by which business angels achieve exits-specifically, the extent to which they were the outcome of a planned strategy or an opportunistic response to circumstances-represents an important question which we cannot answer at present.…”

Section: Introductionmentioning

confidence: 91%

Business angel exits: a theory of planned behaviour perspective

2019

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Although there are a handful of studies on business angel investment returns, the business angel literature has given little or no attention to exits and the exit strategy. This is surprising given that a primary objective of investing is to achieve a capital gain through some form of liquidity event. Using the theory of planned behaviour (TPB) as an interpretative heuristic, we examine how exits happen: specifically, what are the motivations to seek an exit and to what extent are they planned or opportunistic? Based on multiple case studies in which business angels were invited to tell the story of their most recent exit(s), the evidence suggests that the majority of liquidity events are the outcome of planned behaviour. We propose a typology of angel-backed investment exits as the basis for identifying future directions for research and developing practical advice to angels on effective business practices.

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Angel Investing: A Literature Review

Cited by 36 publications

References 12 publications

Stock option taxation: a missing piece in European innovation policy?

Stock option taxation: a missing piece in European innovation policy?

Venture Capital 20 years on: reflections on the evolution of a field

Business angel exits: a theory of planned behaviour perspective

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