The impact of post involvement of Business Angels on the commercial performance of start up businesses

Table of Contents

ACKNOWLEDGEMENT

CHAPTER 1: INTRODUCTION
1.1 Background of the Study
1.2 Research Problem
1.3 Aims of the Research
1.4 Research Questions
1.5 Research Objectives
1.6 Hypotheses
1.7 Scope of the Research
1.8 Importance of the Research
1.9 Research Methodology
1.10 Structure of the Dissertation
1.11 Chapter Summary

CHAPTER 2: LITERATURE REVIEW
2.1 Business Angels and SMEs
2.2 Business angels Benefits to Investee Companies
2.2.1 Helping to Overcome Funding Difficulties
2.2.2 Involvement
2.2.3 Provision of Contacts
2.2.4 Facilitation of Further Funding
2.3 Evaluation of Past Methodologies on Post-Involvement of Business Angels
2.4 Value Added Contributions by Business Angels
2.5 Supervision and Monitoring Role
2.6 Resource Acquisition Role
2.7 Mentoring Role
2.8 Business Angels as Facilitators for Further Finance
2.9 Conceptual Framework
2.10 Summary

CHAPTER 3: METHODOLOGY..
3.1 Introduction
3.2 Overview of the Research
3.2.1 Research objectives
3.2.2 Hypotheses
3.3.3 Research Approach
3.3 Research Philosophy
3.4 Research Design
3.5 Research Strategies
3.6 Research Time Horizon
3.7 Sample Population
3.8 Research Instrument and Data Collection Method
3.9 The Quantitative and Quantitative Aspects
3.10 Data Analysis and Interpretation Method
3.11 Limitations of the Study
3.12 Validity and Reliability
3.13 Ethical Considerations
3.14 Summary

CHAPTER 4: DATA RESULTS, ANALYSIS AND DISCUSSION..
4.1 Introduction
4.2 Quantitative Data
4.2.1 Questionnaire Analysis
4.2.2.1 T-Tests
4.2.2.2 Correlations
4.3 Qualitative Data: Interview Analysis
4.4 Discussion: Linked with Research Objectives
4.4.1 BAs Post Involvement and Financial Stability
4.4.2 BAs Post-Investment Involvement and Investment Sustainability
4.4.3 BAs Enhance Business Partnerships
4.4.4 BAs Involvement and Successful Management and Leadership
4.5 Summary

CHAPTER 5: CONCLUSION AND RECOMMENDATIONS
5.1 Introduction
5.2 Conclusion
5.3 Overview of the Study
5.4 Major Findings of the Study
5.5 Recommendations
5.6 Reflection
5.7 Future Research

REFERENCES

APPENDIX
Questionnaire
Interview Questions

List of Tables

Table 1-You believe that the business angels are sharing their expertise for the benefits of your company

Table 2-Business angels actively participate in the decision making Process of your company.

Table 3-Business angel partnerships assist in enhancing performance of your company.

Table 4-You believe that business angels are significant for SMEs in today’s global environment

Table 5-Business angels help in improving the financial performance in your organization.

Table 6-You believe that business angels help in overcoming funding difficulties for the company.

Table 7-There is a strong relationship between business angels’ knowledge, expertise, and skills on the organization and effective performance.

Table 8-There is a supported relationship between BAs post involvement role and financial performance

Table 9-The lack of post involvement of business angels is the cause of poor performance of start up businesses in UK..

Table 10-Business angels play the role of supervision and monitoring to ensure accelerated performance of company

Table 11-Business angels actively participate in resource acquisition for your company.

Table 12-Business angels take part in the mentoring activities for the company.

Table 13-Business angels assist in providing contacts for relationship building.

Table 14-Business angels help in promoting customer relations in your company.

Table 15-Business angels contribute towards investment appraisal process in your company.

Table 16-Business angels facilitate the attainment of follow-on financing for the investee firms.

Table 17-Business angels actively participate in the board of directors meetings and the provision of consultancy services.

Table 18-Business angels promote the advancement of fresh ventures through provision of expertise, personal experience and abilities.

Table 19-Business angels provide strategic ideas for surviving competitively in global markets.

Table 20-One Sample Statistics H1.

Table 21-One-Sample Test H1.

Table 22-One Sample Statistics H5.

Table 23-One-Sample Test H5.

Table 24-Correlation H2.

Table 25-Correlation H3.

Table 26-Correlation H4.

List of Figures

Figure 1-Inductive vs. Deductive Approach.

Figure 2-Research Onion.

Figure 3-Mixed Research Design.

Figure 4-You believe that the business angels are sharing their expertise for the benefits of your company

Figure 5-Business angels actively participate in the decision making Process of your company.

Figure 6-Business angel partnerships assist in enhancing performance of your company.

Figure 7-You believe that business angels are significant for SMEs in today’s global environment

Figure 8-Business angels help in improving the financial performance in your organization.

Figure 9-You believe that business angels help in overcoming funding difficulties for the company

Figure 10-There is a strong relationship between business angels’ knowledge, expertise, and skills on the organization and effective performance.

Figure 11-There is a supported relationship between BAs post involvement role and financial performance

Figure 12-The lack of post involvement of business angels is the cause of poor performance of start up businesses in UK..

Figure 13-Business angels play the role of supervision and monitoring to ensure accelerated performance of company.

Figure 14-Business angels actively participate in resource acquisition for your company.

Figure 15-Business angels take part in the mentoring activities for the company.

Figure 16-Business angels assist in providing contacts for relationship building.

Figure 17-Business angels help in promoting customer relations in your company.

Figure 18-Business angels contribute towards investment appraisal process in your company.

Figure 19-Business angels facilitate the attainment of follow-on financing for the investee firms.

Figure 20-Business angels actively participate in the board of directors meetings and the provision of consultancy services.

Figure 21-Business angels promote the advancement of fresh ventures through provision of expertise, personal experience and abilities.

Figure 22-Business angels provide strategic ideas for surviving competitively in global markets.

CHAPTER 1: INTRODUCTION

The main title for the dissertation is “The impact of post involvement of Business Angels on the commercial performance of start up businesses: A Case Study of UK enterprises (Crowd vision- Emoquo- Lumejet)”. It is arguably so that start-up businesses (small enterprises) have a significant role when it comes to the economic stability and progress of any nation (De Clercq & Sapienza, 2006). The same position has been affirmed by the Government and Accountants Working Group (2004) where they held that a stable economy requires a viable and successful small business fraternity. In this dissertation much focus is on high-growth businesses which in turn have direct significance to economic development especially for United Kingdom. Therefore, it is indeed a major problem noting on the challenges faced by small businesses in relation to their sustainability and growth. For instance, the problem has been accessibility of finance which in turn poses major challenges. In fact, scholars such as Mansson & Landstrom, (2005) and Munck & Saublens (2003) have expressed that young start up businesses suffer most from challenges related to human capital in the case of experience, skills or knowledge in both managerial and business related issues. Notably, there exists a private source where micro investors can source their finance including fostering high-growth in their ventures. This refers to the business angels (Van Osnabrugge and Robinson, 2000) who provide assistance in resolving such difficulties facing small and medium enterprises. Moreover, they get to use their experience and skills to improve investee companies in their post-investment initiatives (Mason, 2006; Sætre, 2003).

In this dissertation, it was shown that BAs have the relevant prerequisites or what may refer to the ability in providing funding as well as business expertise; in so doing BAs create a potential platform that may assist to overcome all the above mentioned difficulties. Moreover, in this dissertation the researcher set out to investigate the benefits associated with BAs post-involvement activities. At the same time the study shows whether BAs assist start up businesses in United Kingdom overcome the difficulties posed by financial as well as human capital impediments that they often succumb to. In this regard, the dissertation builds on other work done by Munck and Saublens (2005) and especially paying attention to the different experiences for start up businesses (small enterprises) that have been involved with BAs. The dissertation also opens by capturing the research gaps identified here above prior to introducing an evaluation of BAs’ benefits. Further, the methodology is discussed prior to the main discussion of the findings. In the conclusion, the research evaluates the benefits of post involvement of BAs to investee companies among other issues as highlighted in the objectives and hypotheses of the study.

1.1 Background of the Study

Business angels play an essential role in the economic system of United Kingdom as they create useful investment techniques in businesses through their resources and skills. In return they are able to acquire possession of the companies through buying stocks or shares (Business Angel, 2009). The banks in the country are quite hesitant to support little and start-up companies hence it is difficult to acquire financing in form of loans for such tasks. The banks have diverted their credit openness to more established companies which they believe have low risk due to their capability to produce income and pay back the debt. On the other hand, business angels complete the gap that the banks create hence offer capital and skills needed to start investments. Their demand for possession of companies depicts the willingness of the business angels to add value and propel further economic growth (Hegarty and Jones, 2008).

Business angel partnerships have emerged as a new phenomenon for enhancing the growth and performance of start up businesses. After the 2008 financial crisis, the European markets were greatly suffering financially and during this time, business angels emerged as a great resource in terms of funding, innovation and employment. Through the help of business angels, the European markets started producing innovative products for consumers all around the world.

Moreover, business angels also greatly helped start up businesses by funding their start up capital requirements and this led to the successful growth and development of various start up businesses in the European markets. These start up businesses became a source of employment for various unemployed people who were affected by the financial crisis. In short, the concept of business angels became a source of overall revival of the European economy.

The European commission established the European Business Angels Network (EBAN) which started putting extensive efforts towards financing and helping startup companies and SMEs. EBAN basically started the European Business Angels Week in which more than thirty four countries started participating on a weekly basis in order to enhance the performance of their businesses and to benefit from better innovative ideas and job creation opportunities.

Business angels provide post-investment involvement (Baeyens & Manigart, 2006). This has also been referred to as the “post-investment value adding”. The benefits that BA’s give post-investment are:

- Offer their knowledge, expertise, and skills to manage, control, and monitor a given investment to the investee company thus adding value to the business (Mason, 2002).
- In the course of post-involvement BAs participate strategically in the development of the investment(Politis&Landstrom, 2002).
- Filling gaps in personnel thus helping the management function of the investee company (Van Osnabrugge& Robinson, 2000).
- BAs provide startup businesses with their social capital or what may be termed as the personal networks thus benefiting the investee company (Mason, 2002).
- Enhance management contacts and connections.

Other benefits refer to strengthened relations with potential customers and other stakeholders (Munck&Saublens, 2005). In the same respect BA during post involvement bring more contacts who add value to the investment community; for instance, they get to introduce other BAs to the company or making recommendations to other contacts that would help in extending financial boost. In turn, this benefits the investee in accessing additional contacts as well as the possibility of acquiring more financing (Sørheim, 2005).

1.2 Research Problem

The main problem is that for most small companies the commercial performance has not been stable in terms of productivity, market share, human capital, and profitability. Start up businesses may have insufficient social or financial capital as well as weak marketing and management strategies (Davidsson and Honig, 2003).This is also occasioned by rival companies’ monopolies the markets at the detriment of the startup businesses. Inadequate profitability derives from suppressed market share because there lacks enough sales and revenues. The problem with startup businesses commercial performance could be due to the lack of post involvement of business angels.

1.3 Aims of the Research

The aims of the study are:

1. To find out if lack of post involvement of business angels is the cause of poor performance of start up businesses in UK.
2. To make recommendations about what SMEs companies must do to address the problem.

1.4 Research Questions

The research questions of the study are

1. Is the lack of post involvement of business angels the cause of ineffective performance of SMEs in UK?

1.5 Research Objectives

The research objectives of the study are:

1. To assess the degree to which BAs contribute to management and leadership of the studied SMEs.
2. To identify the positive role of BAs in financing the SMES.
3. To evaluate BAs’ contribution to investment sustainability of the studied SMEs.
4. To analyze Bas’ role in enhancing business partnership of the studied SMEs.
5. To explore the types and functions of business angels work with the studies SMEs.

1.6 Hypotheses

In light of the research objectives, the following serve as the hypotheses:

H1: There is supported relationship between BAs involvement and successful management and leadership of studied SMEs.
H2: BAs post involvement has positively led to financial stability of the studied SMEs.
H3: BAs post involvement has positively led to investment sustainability of the studied SMEs.
H4: BAs post-involvement has positively led to enhanced business partnerships of the studied SMEs.
H5: There is statistical significant difference between types and functions of business angels and their contributions to the studied SMEs.

1.7 Scope of the Research

The study tackled three companies in the UK Crowd vision, Emoquo, and Lumejet, and with focus on impact of post involvement of Business Angels on the commercial performance on these businesses. Issues to be measured were included the direct implications this has had on productivity, profitability, sustainability, and competitiveness of startup businesses in UK. However, the study did not focus much on what would be the issues preventing Business Angels to extend financial assistance to startup businesses in the selected population. Moreover, other issues that were not considered included the challenges and risks faced by Business Angels in their intention to financially support startup businesses in the UK.

1.8 Importance of the Research

The overall study provides vast insights based on both primary and secondary data on issues related to post involvement of Business Angles in SMEs. In the same respect, future scholars interested in the same topic may rely on the findings of the proposed study to inform their research. The hypotheses test results was fundamental contributions to existing knowledge. In general, by completing the study successfully, the researcher had the opportunity to advance his studies in the Masters’ program. This dissertation provides wide research on the degree to which post-involvement of BAs would add economic value to start up business in United Kingdom. Thus, the results of this study were useful to potential entrepreneurs in seeking help from BAs so as so to overcome difficulties that affect success and sustainability of start up businesses. Secondly, the findings of the current study might be used by future researchers for further studies.

1.9 Research Methodology

The study has selected mixed research design to explore the research questions and achieve the research objectives. The mixed research design includes both the qualitative and quantitative research methods for collecting and analyzing data. Therefore, positivism and interpretivism research philosophy has been selected which signifies that it is a confirmatory explanatory type of research with the use of both inductive and deductive approaches.

1.10 Structure of the Dissertation

The research framework has been highlighted using the chart below. It illustrates the chapters that were incorporated in this dissertation. Thus, it was on the basis of the outlined chapters that the current dissertation succeeded in achieving its aims and objectives.

The first chapter provided an introduction to the topic including the background, aims and objectives and research questions of the study. The second chapter presented a review of relevant literature, highlighting the previous research carried out in this field. It provided a study of previous work which was carried out in related fields and gives specific research related to a wide spectrum of thought on the topic of post involvement of business angels on the commercial performance of start up businesses. The third chapter covers the methodology employed for this study. The analysis of findings and discussion are presented in the fourth chapter. The fifth chapter provides the discussion which relates the research findings with the existing researches. The last chapter concludes the dissertation, providing major findings of the study, and useful recommendations.

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1.11 Chapter Summary

The study contains chapters which comprise the introduction, literature review, research methodology, results and data analysis, and conclusions, implications, and recommendations. In the introduction chapter it captures the background of the study, research objectives and question, the hypotheses, problem statement, conceptual framework, and significance of the study. In the literature review chapter the study presents an analysis of article, journals, books, and studies administered in the past in regard to the theme of the study. The methodology chapter serves as a plan for how the researcher had been developed and achieved while data analysis part summarizes the understandings and answers to the research question including test results for the hypotheses. Last, but not least the chapter for the conclusion and recommendation captures the main relationship between the primary data findings with the literature review. Here, the researcher also provided recommendations and implications of the study.

CHAPTER 2: LITERATURE REVIEW

2.1 Business Angels and SMEs

Business angels (BAs) are rich people, who put their money for investment purposes in micro unquoted commercial undertakings and they do not have any family connection in these businesses (Deakins and Freel, 2003). The money they offer is called “informal venture capital” as compared to formal venture; andbusiness Angels usually invests their financial resources with the goal of getting profits (Wiltbank, 2005). The actual size of business Angels in the market is not known; it is branded by its unspecified nature because the members live at a distance from public limelight (Harrison and Mason, 1992a, b). For that matter, the accumulative amount put in investment and the aggregate numeral of investments advanced by BAs cannot be verified with certainty and in this regard the used data in this work is considered as an approximation.

It is projected that the number of angel investors in the United Kingdom range between 20,000 and 40, 000 and they contribute between £0.5 billion and £1 billion in three thousand to six thousand businesses in every year (Mason and Harrison, 2000). The literature shows that BAs put their money in entrepreneurial projects due to numerous motivational factors. Of these factors the desire to get substantial financial gains from their investment is given more significance. Nevertheless, BAs appreciate taking roles in the entrepreneurial operations and making “psychic income” (Freear et al., 1995), for instance the hedonic desires of wanting to be engaged in a business or the zeal to assist the succeeding group of entrepreneurs (Mason and Harrison, 2002b).

In today’s highly diverse and competitive global environment, it has become extremely difficult for organizations to acquire finance for their business plans. The SMEs are the ones which suffer the most because only a rare number of investors are willing to invest in them. This is because these SMEs have a high potential of failing in the global markets where there is intense competition and rivalry going on. Therefore, investors believe that they will end up losing their money if they take the risk of investing in SMEs and other small scale start up businesses. Another factor due to which start up businesses are unable to attract investment are that most of the start up businesses and SMEs have new innovative ideas and products which tend to carry huge amounts of risk. Business angels emerged for the sake of helping these innovative startup companies to go ahead with their business plans without having to worry about investors.

The European commission along with the EBAN has been putting extensive efforts for enhancing the development, growth and overall performance of business programs such as SME, Horizon 2020 and COSME. Business angels have been offering loans and other financial resources to new starts up along with risk capital.

According to various researchers, it is believed that business angels have become an extremely useful tool for start up businesses in today’s global business environment. Previously, many innovative and attractive business plans could not come into being as they were unable to acquire the required capital and investment for setting up their businesses.

But nowadays, with the advent of globalization and business angels, it has become much easier for startup companies to attract business angels to come up to their rescue. Business angels do not only help in the initial setting up phases of the SMEs, but also become a huge support in the growth and performance related matters that arise later on. Business angels, as the term itself can be understood means that they act like angels for SMEs and start up businesses from the beginning till the end.

In short, they have become a great source of funding and establishing SMEs in today’s highly competitive global environment. With the advent of globalization, the concept of consumerism has emerged in the global markets which have greatly reduced the prices of products. Due to this, more and more consumers are now able to buy products from a wide variety. This has enhanced the global competition and it has become extremely difficult for SMEs to emerge and then perform in a successful manner.

2.2 Business angels Benefits to Investee Companies

For Harding and Cowling (2006, p.116), apart from financing business activities, business angels provide other services. They provide management professionals, search for connections, and technological motivation for the purpose of obtaining more funding. This perception of real benefits is both shared and expanded by Munck and Saublens (2005), who argue that business angels can profit their companies in the following four ways: they help in minimizing funding challenges encountered by commercial SMEs; use their collective capital to offer their investees with business contacts and, finally expand their investees’ possibilities of acquiring further finance. The four benefits are discussed in depth in the subsequent sections and it is imperative to note that they constituted the structure for this research work.

Business angels are not only an advantage for the company but they have also become a source of tax reliefs for governments. In recent years, the governments of many countries have started encouraging business angels to invest in SMEs and other new businesses by means of enjoying tax reliefs. Another advantage for SMEs and other star up businesses is that business angels have gained widespread popularity around the globe due to which they are located everywhere, particularly in all industries and markets around the globe. The success of business angels over the last few years has motivated other investors to also join this field by giving out their money to SMEs in order to enhance their return on profits.

It is clear from the above discussion that acquiring funds for start up businesses has become the most necessary ingredient in today’s highly competitive world. Previously, it was much easier to acquire funding and investment but due to the financial crisis of 2008 and several bankruptcies it has become extremely difficult to obtain funds from banks and other lending agencies.

2.2.1 Helping to Overcome Funding Difficulties

Van Osnabrugge and Robinson (2000) are of the opinion that business angels are the oldest, widest, frequently used and most essential source of external funds for entrepreneurial high-potential ventures. As a group, business angels invest between 2-5 times extra finance in SMEs than formal venture capital (Barrow et al., 2005) and while the literature by and large holds that BAs are appropriate and reliable base of equity financing for high-performing enterprises (Mason, 2002), BAs are in some circumstances known as the unique group of investors fascinated in investing chiefly in high-performing and growing businesses experiencing financial difficulties (Van Osnabrugge and Robinson, 2000).

2.2.2 Involvement

Apart from their financial investment, business angels provide post-investment support ((Landstro¨m, 1993), commonly known as value addition after investment (Baeyens and Manigart, 2006). According toSapienza et al., (1996) they call it assistance while Fried and Hisrich, (1988) refer to it as contribution. Preceding research has tried to group BAs’ participation into internally similar collections of activities; most frequent activities are categorized as passive or active ( Ardichvili et al., 2002). According to Sapienza et al. (1996) description, passive participation or hands-off method is only providing the financial investment. On the other hand, active or hands-on participation defines the investor as providing non-financial assistance to the investee firm. The relation between active and passive participation are indistinct due to the fact that some academics consider passive involvement to entail monitoring of financial resources, monitoring management reports and participation in strategic matters for instance the provision of strategic instruction or performing as a specialists , advisors or coaches.

On the contrary, active business angels apply their experience, expertise and knowledge to manage as well as to control the venture largely on hands-on and through this they add value to the running of the investment (Mason, 2002). Harrison and Mason (1992b) report that a small number of business angels monitor reports, implying their active involvement. Nevertheless, Landstro¨m (1993) grouped United Kingdom BAs as passive people holding that a few examine reports, rarely take part in stockholder conferences, and prefer not to be engaged on frequent occasions. The motive behind these prevailing differences in terms of findings is explained by the challenges in identifying the limits as far as active and passive involvement is concerned. In this investigative work passive participation is involving the provision of financial resources as well as monitoring the reports. In this context, the other involvement undertakings irrespective of their hands-on nature are categorized as active participation or involvement.

At times business angels participate in Board of Directors meetings (Freear et al., 1995), and in this scenario they access the management information and consequently take part in managerial decisions. A sum of 60% of UK BAs participates in the Board of the investee firms (Van Osnabrugge and Robinson, 2000); however a few of them take chairmen positions (Mason and Harrison, 1996). On the other hand, those business angels who prefer not to be members of the Board can actively take roles in various ways. Dependent on the nature of the business, they can provide a wide knowledge base and proficiency related to business activities and matters pertaining to trade, marketing, accounting, finance etc. A good numeral of BAs is widely known for provision of legal and organizational assistance (Bottazzi and Rin, 2002; Van Osnabrugge and Robinson, 2000). In broad-spectrum, active business angels prefer to be engaged strategically in place of day-to-day basis (Politis and Landstro¨m, 2002); on the other hand, there is a conviction that some of them are engaged on temporal basis to fill the empty spaces of personnel of the management group of the investee firm. This happens when investee firms are deficient of well-proportioned management players in the primary phases of growth (van Osnabrugge and Robinson, 2000).

A certain small numeral of business angels is operationally engaged, and in this context they work for the investee firm and they are remunerated as consultants, employees or advisors. Around 10% of entire BAs, defined as “income-seekers”, aspire to be employed on full-time basis in their investment companies (Kelly and Hay, 2003). It is evident that some of the highly passive BAs possibly become actively engaged, on day-to-day criteria, during the occasions when the business is encountering difficulties (Mason and Harrison, 1996). The reason behind this is that they pursue to safeguard what they have invested. One research paper exploring the investee standpoint arrived at a conclusion that investors and their individual inclinations do not automatically exclusively stipulate the level of participation. Some business persons stated that they opted to have their BAs actively engaged, while some others favored minimal engagement as they argued that involvement is invasive as well as counterproductive (De Noble, 2001).

2.2.3 Provision of Contacts

Apart from experience and skills, new business firms are frequently deficient of social resources for instance business connections and accessibility to proper networks (Davidsson and Honig, 2003; Fredriksen et al., 1990).For that reason when the BAs make available the social capital, they benefit their investee firms (Mason, 2002). Dependent on their personal grounds, a number of BAs present management contacts in the market or recruitment addresses, in other words they endorse executive and non-executive managers. There are some others who enhance relations with prospective clients and external establishments for instance research organizations or universities and above that they encourage alliances (Ehrlich et al., 1994; McKeon, 1996; Munck andSaublens, 2005; Sapienza and Timmons, 1989). In addition to that, many BAs are capable of offering an assortment of connections in the investment class, time and again recruiting other BAs to the firm or approving their investee firms to several other fountains of finance (Cary, 1994). This is beneficial to the investee, and not solely via accessibility to additional connections, but also via the likelihood of nurturing extra financing (Sørheim, 2005).

2.2.4 Facilitation of Further Funding

Under this point, business firms supported by the investment of at least one BA are definitely highly attractive to several other financial sources. This is termed as “leveraging effect” established by BAs, and it expands the possibilities of BA-financed companies to get capital from extra sources such as banks, venture capitals or from private.The concept leveraging effect is expounded by the possibility of BAs generating confidence in the business and expanding its credibility with the rest of the equity financiers (Munck and Saublens, 2005). Furthermore, BAs are beneficial for venture capitals due to the fact that they can take part in industry efforts and at the same time help in minimizing the ongoing day-to-day costs for venture capitals through their participation and experience provision (Harrison and Mason, 2000).When it refers to debt financing, business angels construct a resilient balance sheet that contains upgraded debt-equity ratio, minimizing the risk for loaning institutions and for that matter permitting borrowings (Van Osnabrugge and Robinson, 2000).

Nevertheless, the literature stands inadequate as far as the degree to which BAs make-available follow-on funds: some scholars are in accord (Coveney and Moore, 1998), while others are in opposition to the idea. For instance, Mason and Harrison(1996) observed that solely 25% of BAs put their investments in at least one consequent round. Even though the significance of business angels for the endurance and development of highly growing businesses is emphasized, most preceding research work put emphasis on exploring formal venture capitals (VCs), including several investigations into VCs’ engagement and their profits to investees (for example e.g. Rosenstein et al., 1993).

In addition to that, more previous research considered the investor’s viewpoint (e.g. Paul et al., 2007). This research work handles this breach in business angels literature by exploring the BA benefits for the investee firms from the standpoint of the investee. By attempting that, the usage of the ordered benefits structure, formulated upon Maunck and Saublens’ (2005) research, supplements specific value to the earlier unstructured and theoretical understanding of business angel’s study (Harrison and Mason, 1999).

2.3 Evaluation of Past Methodologies on Post-Involvement of Business Angels

The aims of past studies were to research how their BA investors benefited investee firms. To carry out this investigative work, four research questions related to the discussion above of the benefits background were formulated:

1. Are business angels in a position to cope with young businesses’ financing difficulties?
2. In which ways are the business angels engaged in investee firms in the course of post-investment phase?
3. Do business angels make available contacts to their investees?
4. Do business angels facilitate the attainment of follow-on financing for the investee firms.

This study brings exceptional and significant insights to the prevailing literature for various reasons: the investee viewpoint supplements the current investor- oriented literature (De Noble, 2001), while the application of semi-organized interviews brings a comprehensive assessment concerning the present knowledge of the benefits related to business angel generally from survey information (Ehrlich et al., 1994; Landstrom, 1992). In addition to that, the research further handles the study on post-investment matters (Kelly, 2007; Macht, 2006), justifying the findings as an imperative contribution to the entire structure of BA investments.

Other research aimed to explore the benefits that business angels can provide to investee companies and it involves data collection in detail in order to get the opinions and experiences of the interviewees. Therefore semi-structured comprehensive interviews were perceived a proper data collection methodology and due to financial and time limitations, telephone interviews are designated (Stuges and Hanrahan, 2004). A rich discourse is present as regards the significance of less individual forms of communications for instance electronic or telephone interviews (Morgan and Symon, 2004).

Some scholars perceive telephone interviews inferior as compared to the traditionally used process of direct (face-to-face) interviewing because the telephone discussion does not permit the interviewer to observe and examine any non-verbal or informal gesture (Miller, 1995). However, some researchers put similar value to the telephone interviews, for example, Strurges and Hanrahan (2004) admit that there exists no distinctions in the quality and profundity of data gathered through the two approaches of interviewing and non-verbal cues (for example outbreaths or silences) can also be detected via the phone. For the current research work, the researchers have preferred (Sturges and Hanrahan’s (2004) method and administered telephone interviews as the principal methodology of gathering data.

2.4 Value Added Contributions by Business Angels

Over the past recent years, the scholarly consideration of business angels has enlarged greatly and nowadays it is possible to get studies from a variety of nations and this includes: (Van Osnabrugge 1998; Kelly 2000; Paul, Whittam, and Johnston 2003), Germany (Stedler and Peters 2003), Japan (Tashiro1999; Kutsuna and Harada 2004), Singapore (Hindle and Lee 2002); Reitan and Sørheim 2000; Sørheim and Landstro¨m 2001). In making a comparison with the most primary research studies in this discipline (i.e. Wetzel 1981, 1983); the gathered knowledge concerning BAs for the last twenty years has created an objectively rigorous explanation of the players in BAs market (Mason 2006). In a particular sense, research has established that a typical BA is a medium aged man who relatively devotes a reasonable quantity of his wealth in investment, mostly in newly-established and technology- oriented companies (Mason, Harrison & Chaloner 1991; Duxbury, Haines, and Riding 1996; Hindle and Wenban 1999; Tashiro 1999; Reitan and Sørheim 2000; Hindle and Lee 2002; Stedler and Peters 2003). The working bond that exists between the entrepreneur and the BA can in many circumstances be classified as objectively active. The widely known form of business angel engagement in the business is participating in the board of directors meetings and the provision of consultancy services when needed by the firm (Mason, Harrison, and Chaloner 1991; Landstro¨m 1993; Mason and Harrison 1996; Freear, Sohl, and Wetzel 1997; Tashiro 1999; Hindle and Lee 2002).

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