Rising star monitor: providing insight into remuneration and founding team composition of young, high-potential Belgian ventures

This report provides a snapshot of the trends and challenges involved in young, high-potential ventures in Belgium. Our insights are based on data gathered from 170 young, high-potential Belgian ventures with 370 founders in a wide cross-section of industries. For a more detailed understanding, we have –where relevant– split up our results for high- versus low-growth ambition ventures (HGV versus LGV). Indeed, even though all sampled ventures show some indication of having high growth potential, only around one third of our respondents also indicated having a high growth ambition in terms of their aspired future company size. This group corresponds to what is now often referred to as scale-ups. Hence, potential does not necessarily equal ambition. In this Monitor, we pay special attention to the topics of founding team composition, their equity split and remuneration.2 As such, it is the first study to provide insight into questions such as how many founders young, high-potential Belgian ventures have, where co-founders are found, how founding teams split their equity and what equity stake they retain. We also provide detailed information on founders’ cash remuneration (e.g., as related to company size and industry)

A social-psychological perspective on angel investment decision-making

Academics and practitioners have all often claimed that acquiring resources is a challenging task that entrepreneurs need to overcome to develop their ventures (e.g., Stinchcombe, 1965). This challenge is particularly acute for young, high-growth potential ventures because they often involve unproven technologies or business models (e.g., Berger & Udell, 1998). Angel investors are a primary source of early-stage (i.e., seed and startup) risk capital available to such entrepreneurs, and tend to come in after entrepreneurs have depleted their personal savings and money from family and friends (e.g., Drover et al., 2017). Many highly successful companies such as Zoom, Airbnb, Google, Starbucks, The Body Shop, Innocent Smoothies, and Showpad have all been backed by angels. The pitch represents a critical first step towards raising interest among angel investors and securing much-needed funding (e.g., Chen et al., 2009; Kanze, Huang, Conley, & Higgins, 2018; Maxwell, Jeffrey, & Lévesque, 2011). The pitch is a decisive moment in entrepreneurs' quest for money as investors reject 70 to 90 percent of pitches (e.g., Chen et al., 2009; Huang & Pearce, 2015; Maxwell et al., 2011). This dissertation contributes to the growing stream of research that examines angels' investment decision-making. By drawing on theories from social psychology literature, this dissertation seeks to offer a more relational perspective to explore how angels judge entrepreneurs during their pitch and how angel and entrepreneur interact with each other during their first face-to-face meeting. The first paper of this dissertation focuses on the impact of angel's judgment about the entrepreneur on their decision to invest at the end of the pitching phase (i.e., after Q&A session), the second paper focuses on explaining why angels lose interest to invest within the pitching phase (from after the presentation to after the Q&A session) and the third paper focuses on the social interaction between entrepreneur and angel during the Q&A session. More specifically, building on social judgment research and resource allocation theory, the first study explores entrepreneur's warmth and competence as two critical dimensions along which angels perceive and judge entrepreneurs when making investment decisions and how angels' mental resources explain the interplay between perceived warmth, perceived competence and pitch sequence. The second study builds on the Elaboration Likelihood Model as dual-process theory to examine the impact of angel's experience and entrepreneur's verbal and nonverbal behavior on angel's likelihood to lose interest to invest from the presentation to after the Q&A session. In the third study examines the impact of angel's power words when asking questions on entrepreneur's answers

From pitch to Q&A: Why do business angels change their minds?

Drawing on the elaboration likelihood model, this paper develops and tests a set of hypotheses concerning why business angels change their intentions to invest moving from pitch to Q&A. We test our hypotheses using a sample of 654 real-life angel evaluations of entrepreneurs pitching for money. Our results suggest a change in intentions to invest is less likely to occur when the entrepreneur has a more attractive voice, higher levels of displayed passion and higher levels of perceived coachability. Angels are more likely to change their minds though when they perceive the entrepreneur to be more trustworthy

From pitch to Q&A: Why do business angels change their minds?

Drawing on the elaboration likelihood model, this paper develops and tests a set of hypotheses concerning why business angels change their intentions to invest moving from pitch to Q&A. We test our hypotheses using a sample of 654 real-life angel evaluations of entrepreneurs pitching for money. Our results suggest a change in intentions to invest is less likely to occur when the entrepreneur has a more attractive voice, higher levels of displayed passion and higher levels of perceived coachability. Angels are more likely to change their minds though when they perceive the entrepreneur to be more trustworthy

From pitch to Q&A: Why do angel investors change their minds?

Drawing on the elaboration likelihood model, this paper develops and tests a set of hypotheses concerning why business angels change their intentions to invest moving from pitch to Q&A. We test our hypotheses using a sample of 654 real-life angel evaluations of entrepreneurs pitching for money. Our results suggest a change in intentions to invest is less likely to occur when the entrepreneur has a more attractive voice, higher levels of displayed passion and higher levels of perceived coachability. Angels are more likely to change their minds though when they perceive the entrepreneur to be more trustworthy

Badge of honor or tolerable reality? How previous firm failure and experience influences investor perceptions

Entrepreneurs face considerable obstacles in accruing funding and other resources when starting a new venture; problems that are likely compounded when starting a new venture after experiencing failure. In particular, it is unclear how early-stage investors react to entrepreneurs with prior failure experiences in terms of how they perceive the entrepreneur's capabilities and how they evaluate the new venture. Leveraging expectancy violation theory, we theorize that prior failure will lead to more negative outcomes than prior success, but more positive outcomes than those with no prior entrepreneurial experience, and that this effect will be further attenuated by whether the entrepreneur learned or not from their prior experience. We test our model using a scenario-based experiment of 828 decisions made by 69 early-stage investors. We contribute to the literature on early stage investor decision making, entrepreneurial failure and learning, and discuss implications and future research directions given our findings