Angels or Sharks? The Role of Personal Characteristics in Angel Investment Decisions

This paper uses actual negotiations between angel investors and entrepreneurs to study the impact of personal characteristics on investment outcomes. Using a new dataset of 611 investment requests led by 928 entrepreneurs, we find evidence that the personal characteristics of the entrepreneur, including gender, race, and age, are correlated with entrepreneurs’ requested valuations, the likelihood that an offer is received, and the implied valuation when an angel investor extends an offer. We also find evidence that homophily influences the outcome of negotiations. Specifically, shared personal characteristics affect the likelihood that an investor makes an offer, the entrepreneur accepts an offer, and the implied valuation when an offer is extended.