Heuristics, learning and the business angel investment decision-making process

This paper extends the literature on the investment decision-making of business angels.Using insights from the emerging body of research on entrepreneurial learning processes, particularly the use of heuristics and the nature of learning from meagre experience, we explore whether angels learn from experience, how they learn and what they learn. These issues are addressed using verbal protocol analysis, a methodology for examining decision-making in real time, with three groups of business angels with differing levels of investment experience, and with follow-up debriefing interviews with these angels. This reveals some differences in the speed of decision making and the emphasis given to various investment criteria. There is some evidence for the use of heuristics in the decision making process, and for the critical role played by vicarious learning from the experience of others. Learning in the individual angel decision making process is a social as well as an individual phenomenon.