Journal of Business Economics

, Volume 88, Issue 3–4, pp 471–501 | Cite as

Building an equity story: the impact of effectuation on business angel investments

  • Sebastian Schmidt
  • David Bendig
  • Malte Brettel
Original Paper


This study investigates the effects of the decision-making style of angel investors on their investee businesses’ valuations with a particular focus on the early post-investment phase. Business angels not only provide new ventures with financial resources. By assuming different value-added roles, they also contribute considerable non-financial value to their investee companies during the post-investment phase. They not only act entrepreneurially through their hands-on involvement, but also often have their own distinct entrepreneurial experience. We hence draw on the emerging entrepreneurial decision-making theory of effectuation to explain their investment outcomes in an environment of uncertainty. This study links angels’ decision-making styles to their ventures’ valuations in the period between their initial investment and the first external follow-up investment in an investee business. Based on a sample of 73 angel investments, this study finds that informal investors experience a significant increase in their investments’ valuation if they emphasize the effectual principle of means-orientation in their decision-making.


Entrepreneurship Effectuation Means-orientation Venture capital Business angels Valuation 

JEL Classification

D81 G24 G31 L26 


Compliance with ethical standards

Conflict of interest

The authors declare they have no conflict of interest.


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Copyright information

© Springer-Verlag GmbH Germany 2017

Authors and Affiliations

  • Sebastian Schmidt
    • 1
  • David Bendig
    • 1
  • Malte Brettel
    • 1
  1. 1.Innovation and Entrepreneurship Group (WIN), TIME Research AreaRWTH Aachen UniversityAachenGermany

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