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date: 15 July 2020

Abstract and Keywords

This article uses data from The Performance Project: Group Angel Investor, released by the Kauffman Foundation and the Angel Capital Education Foundation in 2007 to investigate the value added by angels through their postinvestment involvement (PII) with ventures. In contrast with findings showing that venture capitalist PII may not significantly affect venture performance, the results show that the PII of angels contributes significantly to value creation. The value added is due to involvement related to mentoring rather than monitoring. This resultant value added has a very important implication for the ownership share that angel investors deserve or, conversely, the share that the entrepreneurship retains. It is an important factor missing in current discussions about the ownership share that entrepreneurs must surrender in exchange for equity capital. The article discusses the implication conceptually and proposes an adjustment to the model proposed in the literature to determine the theoretical ownership share that entrepreneurs deserve to retain.

Keywords: venture capital, postinvestment involvement, angel investors, value creation, mentoring, ownership share, entrepreneurs

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