Angel Investment Criteria


  • Richard Sudek Claremont Graduate University


Start-up businesses often need external financing to grow. These new ventures frequently turn to business angel investors for capital. Angels, who are often wealthy individuals, provide early stage financing, called seed capital, for these start-up ventures. This study examines what a group of angel investors in Southern California consider when reviewing an investment opportunity, and how they prioritize their investment criteria. The study utilizes a two-phase approach consisting of a qualitative first phase and a quantitative second phase. The results of this study show that trustworthiness of the entrepreneur, quality of the management team, enthusiasm of the lead entrepreneur, and exit opportunities for the angel are the angels' top criteria.


Download data is not yet available.


Baty, G.B. (1991). Entrepreneurship for the 1990s. Englewood Cliffs, NJ: Prentice Hall.

Benjamin, G.A. & Margulis, J. (2000). Angel Financing: How to Find and Invest in Private Equity. New York: John Wiley & Sons.

Bygrave, W.D. & Timmons, J.A. (1992). Venture Capital at the Crossroads. Boston, MA: Harvard Business School Press.

Carter, R.B. & Van Auken, H.E. (1992). Effect of professional background on venture capital

proposal evaluation. Journal of Small Business Strategy, 3(1): 45-55.

Coveney, P. (1996). Informal Investment in Britain: An Examination of the Behaviors,

Characteristics, Motives and Preferences of British Business Angels. Unpublished doctoral

dissertation, Univeristy of Oxford.

Dixon, R. (1991). VCs and the appraisal of investments. OMEGA International Journal of Management Science, 19, 333-344.

Elitzur, R. & Gavious, A. (2003). Contracting, signaling, and moral hazard: a model of entrepreneurs, angels, and venture capitalists. Journal of Business Venturing, 18, 709-725.

Ehrlich, S.B., Noble, A.F., Moore, T., & Weaver, R.R. (1994). After the cash arrives: a comparative study of venture capital firms and private investor involvement in entrepreneurial firms. Journal of Business Venturing, 9, 67-82.

Freear, J. & Wetzel, W.E. (1991, April). The informal venture capital market in the year 2000. Paper presented at the Third Annual International Research Symposium on Small Business Research, Florida State University.

Freear, J., Sohl, J.E., & Wetzel, W.E. (1992). The truth about angels more than a myth. Working Paper, Center for Venture Research, University of New Hampshire.

Freear, J., Sohl, I.E., & Wetzel, W.E. (1997). The informal venture capital market: milestones passed and the road ahead. In D. Sexton and R. Smilor (eds) Entrepreneurship 2000 (Chicago: Upstart Publishing Company), 47-70.

Greene, J.C., Caracelli, V.J., & Graham, W.F. (1989). Toward a conceptual framework for mixed-method evaluation designs. Educational Evaluation and Policy Analysis, 11(2), 255-274.

Harr, N.B., Starr, J., & MacMillan, I.C. (1988). Informal risk capital investors: investment patterns on the east coast of the U.S.A. Journal of Business Venturing, 3, 11-29.

Harrison, R.T. & Mason, C.M. (1992). International perspectives on the supply of informal venture capital. Journal of Business Venturing, 7, 459-475.

Hisrich, R. & Jankowicz, A. (1990). Intuition in venture capital decisions: an exploratory study using a new technique. Journal of Business Venturing, 5, 49-62.

Kauffman Foundation. (2002). Business angel investing groups growing in North America.

Retrieved April 10, 2006, from mmit_report.pdf.

Kauffman Foundation. (2005). Kauffman index of entrepreneurial activity.

Retrieved April 10, 2006, from Property/

webCacheRepository/Documents/2005.Fairli e.KaufrmanIndex.pdf.

MacMillan, I.C., Sigel, R., & SubbaNarashimha, P.N. (1985). Criteria used by venture capitalists to evaluate new venture proposals. Journal of Business Venturing, 1, 119-128.

MacMillan, I.C., Zemann, L., & SubbaNarashimha, P.N. (1987). Criteria distinguishing successful from unsuccessful ventures in the venture screening process. Journal of Business Venturing, 2, 123-137.

Mason, C.M. & Harrison, R.T. (1996). Why 'business angels' say no: a case study of opportunities rejected by an informal investor syndicate. International Small Business Journal, 14(2), 35-51.

Mason, C.M. & Harrison, R.T. (2002). Is it worth it? The rates of return from informal venture capital investments. Journal of Business Venturing, 17, 211-236.

Miles, M.B. & Huberman, A.M. (1994). Qualitative Data Analysis: An Expanded Sourcebook. Thousand Oaks, CA: Sage.

Ojala, M. (2002). Researching Small Business Concerns. Online, 26(6), 55-57.

Patton, M.Q. (2002). Qualitative Research and Evaluation Methods. Thousand Oaks, CA: Sage Publications.

Shepherd, D.A. (1999). Venture capitalists' assessment of new venture survival. Management Science, 45(5), 621-632.

Sohl, J. (n.d.). The angel investor market 2004: the angel market sustains the modest recovery. Retrieved April 8, 2006 from University of New Hampshire Web site: .pdf

Timmons, J.A. (1990). Planning and Financing the New Venture. Acton, MA: Brick House Publishing Co.

Timmons, J.A.& Spinelli, S. (2004). New Venture Creation: Entrepreneurship for the 21st

Century. New York, NY: McGraw-Hill/Irwin.

Tyebjee, T. & Bruno, A. (1984). A model of venture capitalist investment activity. Management Science, 30(9), 1051-1066.

Van Osnabrugge, M. (1998). The Financing of Entrepreneurial Firms in the UK. Unpublished doctoral dissertation, Univeristy of Oxford.

Van Osnabrugge, M. & Robinson, R. J. (2000). Angel investing: matching start-up funds with start-up companies: the guide for entrepreneurs, individual investors, and venture capitalist. San Francisco: Jossey-Bass.

Wetzel, W.E. (1987). The informal venture capital market: aspects of scale and market efficiency. Journal of Business Venturing, 2, 299-313.




How to Cite

Sudek, R. (2006). Angel Investment Criteria. Journal of Small Business Strategy, 17(2), 89–104. Retrieved from