What matters, matters differently: a conjoint analysis of the decision policies of angel and venture capital investors

Prior studies have examined the importance of economic, strategic, and human factors to decision policies of angel investors and venture capitalists. As more angels professionalize into angel funds and as markets for technologies and ideas become more competitive, it is becoming more important to compare their decision policies with those of venture capitalists. Drawing upon agency theory, we examine whether economic potential, specific human capital, strategic readiness, and passion matter differently to venture capitalists and angel investors. Our study is an experimental conjoint analysis of more than 2700 investment decisions nested within a mixed sample of venture capitalists and angel investors. We find that strategic readiness for funding and affective passion matter more to angel investors, while economic potential matters more to venture capitalists. We also find that both investor types place similar weights on the specific human capital of entrepreneurs. These findings support the agency view that differences in the investment decision policies of angel investors and venture capitalists can be explained by examining the agency costs, market risks, information asymmetry, and control mechanisms that are structured into angel and venture capital deals.