ENTREPRENEUR - BUSINESS ANGEL RELATIONSHIPS

This paper examines the logics and expectations of entrepreneurs and business angels prior to going into a relationship. Comparisons of the entrepreneurs and the business angels show difference regarding their confidence about their own mind-sets and expectations. The findings are discussed taking an institutional approach; an exogenous institutionalism is influencing the actor, as his logic and expectations are seen as a result of his previous experience and the professional and social networks he his part of. The findings show that network matters, because personal contacts to people in the informal venture capital setting have a moulding effect on mind-sets and expectations. Incubators, BANs and other organisations involved in match-making activities will be able to use this knowledge actively in order to enable more match-makings between entrepreneurs and business angels in the future. Introduction Access to start-up capital through both formal venture capital institutions and informal investors are important to the entrepreneurial activity. Informal investors, i.e. private individuals, who invest risk capital to unlisted companies, that they have no previous formal or family related connections to, do not only provide capital to the venture but also valuable expertise, contacts etc. Entrepreneurs are dependent on access to financial resources, but it is often difficult for new ventures to find the equity capital necessary for their development and growth, especially the more innovative entrepreneurs have difficulties in finding the necessary capital. The traditional investors, like banks, regard these projects as too risky, and the formal venture capital firms often are not interested in investing in young firm in the early stages. Informal investors are regarded as very important because they represent capital that can fill this equity funding gap that seems to exist. Research results from more countries points to the fact, that informal, private investors are an important financial source for innovative firms in the early phases. At the same time more results points in the direction, that there is an unutilised potential resting by these informal investors, so in several countries government, policy-makers etc. are working very actively with initiatives that are aimed at increasing the supply of finance for example by and the establishment of business angel networks (BANs) and similar, that shall act as matching points and as means of recruiting new informal investors. Some of the latest research results from UK (Mason & Harrison 2001) implicates that BANs and matchmaking activities are not enough, there are still barriers to investment among the informal investors, because their investment preferences are too narrow. On the other hand the entrepreneurs who are presenting the investment opportunities are not always ”investor ready”. Earlier research in this area has repeated the need for further research on the investor entrepreneur relationship and for theoretically grounded contributions, and as the field has developed more successful attempts have been done in order to apply especially transaction cost