Entrepreneurs, Investors, and Impression Management




Assistant Professor of Management and Entrepreneurship at Wharton

Project Summary

For early stage ventures and startups, funding serves as the fuel behind rapid growth. With funding, companies can conduct R&D, hire new talent, launch new products, and refine their marketing strategy. After gathering funds from friends and family, entrepreneurs often turn to angel investors. Entrepreneurs pitch to angel investors and if the investors like the company, they provide funding in exchange for equity. This summer, I spent 10 weeks studying how these angel investors make decisions.  

One would think that investors primarily use quantitative data such as the company’s financials, but angel investors frequently use their intuition instead. I combed through survey responses from hundreds of angel investors and found that the majority of angel investors use their “gut” more often than hard analysis, explaining that the behavior and interactions with entrepreneurs offer a stronger indicator of the company’s success than financial projections and sales data. Some angel investors also said that hard data for startups is often inaccurate. As such, the company’s management and the potential of the idea function as the main drivers behind angel investors’ decision making process.  

From this survey data and help from Professor Laura Huang and lab manager MinJu, I wrote a 19 page paper on angel investors in the US. I scoured literature written on angel investors and incorporated it into my paper. I also helped classified the areas of companies that angel investors fund and looked up data on angel groups. This summer, I even had the opportunity to sit in on an angel investor group meeting. I heard early stage ventures pitch to the angel investors and observed how they reached their decisions in a closed door environment. I found it fascinating to see the research I did this summer in action. The angel investors did rely heavily on their “gut,” often referring to their expertise in certain fields when deciding whether investing in the company felt right or not.  

Thank you Professor Huang and MinJu for making PURM an excellent learning experience!