HOW CRITICAL CUES INFLUENCE ANGELS’ INVESTMENT PREFERENCES

Research suggests that investment decisions are typically based on investors’ intuition (Zacharakis & Shepherd, 2001). We posit that an ego-focused process underlies angels’ intuition formation wherein they consider whether they will be able to have an impact on the venture’s success as they evaluate potential investments. We use social identity and mentor-protege theories to develop hypotheses which we test using angel investors’ real-time evaluations of entrepreneurs’ pitches. We find that investors’ preferences are higher the more the similar the investors’ experience is to the opportunity space and the more the entrepreneur demonstrates receptivity to investor coaching and mentorship. Our findings highlight how impressions formed by observing an entrepreneur’s pitch in the investment process may lay the ground work for the working relationship between angels and entrepreneurs.