In many developed countries angel capital investment is the main source of external financing for high growth early-stage entrepreneurial companies. In spite of its importance, research in the angel capital market is still very limited. This is partly due the fact that data on angel capital investment is rare and unsystematic. This dissertation attempts to learn more about this important but not well-understood angel capital market. In particular, the first essay looks at the relationship between angels and venture capitalists in financing start-up ventures. This essay juxtaposes a complements hypothesis – angel financing is a springboard for venture capital, against a substitutes hypothesis – angels and venture capital are distinct financing methods that ought not to be combined. The result shows that companies that obtain angel financing subsequently obtain less venture capital, and vice versa. On average venture capitalist make larger investments, but this alone cannot explain the substitutes pattern. In addition, this essay reports that companies funded by venture capital perform better than angel backed companies, as measured by successful exits or revenues. Mixing angel and venture capital funding tends to be associated with worse performance. The second essay studies the role of geographic distance between the angel investors and the investee companies on the angel investment performance. This essay conjectures four possible channels that can explain the relationship between distance and the return to angel investment. It shows that distance has a positive relationship with the return to angel investment. Examining the effect of distance across different categories of angel investors, across angel investor’s locations, and across company’s location, this essay finds evidence that this positive relationship is mainly driven by the “objectivity effect”, which suggests that distant investors can evaluate the prospect of a company more objectively than close-by investors, who tend to be more biased in their judgments. The third essay examines why entrepreneurs find it generally hard to find angel investors. This essay modifies the standard search model introduced by Pissarides to explain this phenomenon. In this model, angels hide to force entrepreneurs to engage in a costly search. The result shows that angel investors adopt the hiding strategy to screen out low-productivity entrepreneurs who would otherwise inundate angels. Interestingly, social surplus is often increased when angels hide, though in some circumstances surplus may fall. / Graduate / 0505 / danvo@uvic.ca

Background:Business Angels (BA) and Angel Investment Organizations (AIO) have become an essential source of capital for entrepreneurs, whereas Business Angel Groups (BAG) are the most recent organizational form in which Business Angels organize themselves. However, BAG still face several issues that prevent them from success in the long term, such as identifying the right members and creating membership engagement. Consequently, why these forms still fail remains unknown. Although, research on how new organizational forms emerge has received considerable attention. There are missing explanations for why they fail. Moreover, the reasons why organizations build legitimacy has been thoroughly investigated. Nevertheless, legitimacy in the emergence of new organizational forms has been neglected. Purpose:This study explores the emergence of a new stable organizational form through the lens of legitimacy. The main goal is to understand how legitimacy judgments can influence the emergence of a new form and how an organization can affect this process. The purpose is to contribute to the literature about AIO, emerging new organizational forms, and legitimacy. Method:Based on a retroactive longitudinal qualitative single case study, the researchers used grounded theory to derive a new theory from data. The study follows the Gioia method, a systematic inductive approach to concept development. The primary data consisted of 18 semi-structured interviews with practitioners, case informants, and context informants, triangulated with secondary data from documents, articles, and websites. Conclusion:The findings indicate that unstable organizations face problems aligning legitimacy judgments. Consequently, if successfully aligned, a new stable organizational form emerges. First, our findings contribute to the literature on the emergence of new organizational forms by including legitimacy processes. Second, we contribute to the framework of legitimacy by highlighting the importance of micro-meso-macro interrelationships. Finally, the findings contribute to the BA literature by providing a new form of AIO, named Business Angel Fund (BAF), that enables legitimacy alignment and solves current issues.

Submitted by JOSIANE SANTOS DE OLIVEIRA (josianeso) on 2018-07-31T16:29:25Z No. of bitstreams: 1 Giulliano Tozzi Coelho_.pdf: 3230618 bytes, checksum: 1bd46fd793c7c58d0750efa206629e74 (MD5) / Made available in DSpace on 2018-07-31T16:29:25Z (GMT). No. of bitstreams: 1 Giulliano Tozzi Coelho_.pdf: 3230618 bytes, checksum: 1bd46fd793c7c58d0750efa206629e74 (MD5) Previous issue date: 2018-05-03 / Nenhuma / As startups desempenham um papel relevante na produção de inovações e, por consequência, no desenvolvimento econômico. Por não possuírem todos os recursos necessários para o desenvolvimento dos seus negócios, é comum optarem por procurarem investimentos, encontrando nos investidores-anjo uma opção vantajosa. No Brasil, apesar de existirem algumas opções por realizar essa espécie de investimento, optou-se por adotar as chamadas notas conversíveis, fortemente inspiradas na prática norte-americana. Tais instrumentos podem ser definidos como um investimento realizado através da concessão de um empréstimo, o qual poderá ser pago na data de vencimento através da conversão do saldo devedor em participação societária. A conversão é obrigatória, entretanto, quando ocorre algum evento de liquidez entre a concessão do empréstimo e o vencimento. Por contarem com inúmeras cláusulas de natureza societária, tais instrumentos não podem ser classificados como o instituto típico do mútuo. Deste modo, poderia o instituto ser classificado ou como uma sociedade em comum, em face das disposições peculiares do instrumento, ou como um contrato atípico consagrado pelos usos e costumes. Para responder essa questão foi conduzida uma pesquisa qualitativa através da entrevista de doze pessoas que participaram destas operações na condição de investidor ou empreendedores. Os resultados confirmam que as notas conversíveis são o instrumento comumente utilizado nas operações de investimentoanjo, bem como que as partes entendem estar diante de uma norma jurídica exigível ao se valerem do instituto. Aliado a isto, o resultado pode ser sustentado pela percepção de outros instrumentos similares no ordenamento, a ausência da identificação do fim comum entre as partes, bem como pela teoria da atipicidade contratual. / Startups play an important role on the production of innovations and on economic development. Since startups do not have all the necessary resources for the development of their business, they often look for financial support from angel investors. In Brazil, although there are some formal options to contract this type of investment, entrepreneurs decided to adopt the so-called convertible notes, strongly inspired by US practice. Such instruments may be defined as an investment made through the granting of a loan, which may be paid on the maturity date through the conversion of the debtor balance into equity. Conversion is mandatory, however, when any liquidity event occurs between the granting of the loan and the maturity. Since the convertible notes have numerous clauses of corporate nature, such instruments can not be classified as the typical institute of loan. In this way, the institute could be classified as a partnership, or as an atypical contract consecrated by customs. This dissertation conducted interviews with twelve people who participated in these operations as investors or entrepreneurs. The results confirm that convertible notes are the instrument commonly used in angel-investment operations, as well as the fact that the parties understand that they are in compliance with a legal standard that is required when using the institute. Allied to this, the result can be sustained by the perception of other similar instruments in the Brazilian legal framework, the absence of the identification of the common objectives between the parts, as well as by the theory of contractual atypicity.

The lack of coherent and established methods and processes for evaluating early-stage development projects presents a severe challenge for both investors and entrepreneurs. For investors, the lack of an established process risks making every investment decision “ad hoc”, and in the long run prevent any meaningful analysis or comparison between different investments. For the entrepreneur, it makes the fundraising process a maze of seemingly random information requests from potential investors and a constant lack of understanding of where in the process they are, what is required to reach a decision and where to focus their efforts. This thesis describes these challenges in more detail together with some general background of the tools available today. It continues to outline a generalized process for reaching an investment decision, together with descriptions of the different information artifacts that are central to the process. The result is a step-by-step process that can be predicted and iterated between the entrepreneur and the investor. In each step, focus is on a certain piece of information and the goal is to make it clear to all parties what is expected in each step and why. / Avsaknaden av en koherent och vedertagen process för att utvärdera utvecklingsprojekt i tidig fas presenterar and allvarlig utmaning för både investerare och entreprenörer. För investerare, bristen på en etablerad process riskerar att varje investeringsbeslut tas på ”ad-hoc” basis, vilket i det långa loppet omöjliggör meningsfull analys och jämförelse mellan olika investeringar. För entreprenören så gör det processen att söka investeringskapital till en labyrint av slumpmässiga informationsförfrågningar ifrån potentiella investerare och en konstant brist på förståelse för var i processen de befinner sig, vad som krävs för att nå beslut och vart de skall fokusera sitt arbete. Denna rapport beskriver dessa utmaningar i mer detalj, tillsammans med viss generell bakgrund om de verktyg som finns att tillgå idag. Den fortsätter med att beskriva en generaliserad process för att nå ett investeringsbeslut och de informationsartefakter som är centrala för processen. Resultatet är en steg för steg process som är förutsägbar och som kan itereras mellan entreprenören och investeraren. I varje steg ligger fokus på en specifik informationsdel och målet är att göra det tydligt för alla inblandade vad som förväntas i varje steg och varför.