Business angels are vital sources of funding for new ventures. Yet, acquiring business angel support is difficult. Typically organized in professional networks, business angels collectively evaluate and deliberate about new ventures to determine their worthiness of support. One factor deemed to be critical during this evaluation is market risk. Yet, limited research in Macromarketing examines market risk. To our knowledge, no previous study examines market risk in capital markets, nor do they study angel financing. Neglecting to study angel financing is particularly problematic for macromarketing because this type of finance is much more prominent than venture capital in supporting new ventures. To fill this gap, we begin by exploring the literature by Lusch (and coauthors) linking marketing and capital markets as well as studies of market risk. We then craft fictitious angel investment proposals to measure market risk assessments by business angels and entrepreneurs. We ask which factors impact market risk during the early-phases of the investment screening process (when market risk is weighted more heavily) and identify whether these factors are evaluated differently by entrepreneurs versus business angels. Our findings reveal that commercialization capability, technological compatibility, and intellectual property rights enforceability influence perceived market risk and that entrepreneurs and business angels view these factors significantly differently. We then offer directions for further research related to this study and other work of Lusch. Finally, we suggest practical implications for use by business angels and entrepreneurs.
How business angel groups work: Rejection criteria in investment evaluation
