Experience, heuristics and learning: the angel investment process

This paper extends the literature on the investment decision-making of business angels. Using insights from entrepreneurial learning theory we explore whether angels learn from experience, how they learn and what they learn. These issues are addressed using Verbal Protocol Analysis, a methodology for examining decision-making in real time, on three groups of business angels with differing levels of investment experience, and follow-up interviews with these angels. This reveals some differences in the speed of decision making and the emphasis given to various investment criteria. The relatively limited extent of the contrasts can be attributed to two factors. First, angel learning has been in terms of their approach to investing rather than fundamentals. Second, this learning has had more effect on how they conduct their due diligence on opportunities that pass their initial screening than on the initial screening stage itself. Learning from other investors is important.