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Valuation of angel-backed companies: the role of investor human capital

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Hercules 19104512W
Abstract
This paper examines how angel investors’ human capital affects the valuation of their portfolio companies, based on the pre-money valuation of 123 investment rounds in 58 Belgian companies. We argue that angel investors with higher levels of human capital will perceive a higher value-creating potential in entrepreneurial opportunities through their ability to see more value-creating options, a higher value-adding potential post-investment and an enhanced legitimacy provided to the venture. Economic theories suggest they appropriate these rents through lower valuations, while stewardship theory suggests they share value creation with entrepreneurs. Consistent with stewardship theory, we show angel investors negotiate higher valuations when they have higher levels of human capital, more specifically if they studied longer, have a business degree, more entrepreneurial experience or previous professional law experience. As such, our results contrast with the behaviour of venture capital investors who negotiate lower valuations when they have more experience.
Keywords
VENTURE CAPITALISTS, TECHNOLOGY-BASED FIRMS, DECISION-MAKING, ENTREPRENEURS, KNOWLEDGE, INFORMATION, PERFORMANCE, GOVERNANCE, FOUNDERS, BEHAVIOR

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MLA
Collewaert, Veroniek, and Sophie Manigart. “Valuation of Angel-backed Companies: The Role of Investor Human Capital.” JOURNAL OF SMALL BUSINESS MANAGEMENT 54.1 (2016): 356–372. Print.
APA
Collewaert, V., & Manigart, S. (2016). Valuation of angel-backed companies: the role of investor human capital. JOURNAL OF SMALL BUSINESS MANAGEMENT, 54(1), 356–372.
Chicago author-date
Collewaert, Veroniek, and Sophie Manigart. 2016. “Valuation of Angel-backed Companies: The Role of Investor Human Capital.” Journal of Small Business Management 54 (1): 356–372.
Chicago author-date (all authors)
Collewaert, Veroniek, and Sophie Manigart. 2016. “Valuation of Angel-backed Companies: The Role of Investor Human Capital.” Journal of Small Business Management 54 (1): 356–372.
Vancouver
1.
Collewaert V, Manigart S. Valuation of angel-backed companies: the role of investor human capital. JOURNAL OF SMALL BUSINESS MANAGEMENT. 2016;54(1):356–72.
IEEE
[1]
V. Collewaert and S. Manigart, “Valuation of angel-backed companies: the role of investor human capital,” JOURNAL OF SMALL BUSINESS MANAGEMENT, vol. 54, no. 1, pp. 356–372, 2016.
@article{5668091,
  abstract     = {This paper examines how angel investors’ human capital affects the valuation of their portfolio companies, based on the pre-money valuation of 123 investment rounds in 58 Belgian companies. We argue that angel investors with higher levels of human capital will perceive a higher value-creating potential in entrepreneurial opportunities through their ability to see more value-creating options, a higher value-adding potential post-investment and an enhanced legitimacy provided to the venture. Economic theories suggest they appropriate these rents through lower valuations, while stewardship theory suggests they share value creation with entrepreneurs. Consistent with stewardship theory, we show angel investors negotiate higher valuations when they have higher levels of human capital, more specifically if they studied longer, have a business degree, more entrepreneurial experience or previous professional law experience. As such, our results contrast with the behaviour of venture capital investors who negotiate lower valuations when they have more experience.},
  author       = {Collewaert, Veroniek and Manigart, Sophie},
  issn         = {0047-2778},
  journal      = {JOURNAL OF SMALL BUSINESS MANAGEMENT},
  keywords     = {VENTURE CAPITALISTS,TECHNOLOGY-BASED FIRMS,DECISION-MAKING,ENTREPRENEURS,KNOWLEDGE,INFORMATION,PERFORMANCE,GOVERNANCE,FOUNDERS,BEHAVIOR},
  language     = {eng},
  number       = {1},
  pages        = {356--372},
  title        = {Valuation of angel-backed companies: the role of investor human capital},
  url          = {http://dx.doi.org/10.1111/jsbm.12150},
  volume       = {54},
  year         = {2016},
}

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