Sustaining trust to cross the Valley of Death: A retrospective study of business angels' investment and reinvestment decisions.

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Date: Jan. 2022
From: Technovation(Vol. 109)
Publisher: Elsevier Science Publishers
Document Type: Report; Brief article
Length: 288 words

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Abstract :

Keywords Valley of death; Financial resources; Business angel; Trust; Investment; Reinvestment; Exit Highlights * Business angels' trust primarily relies on trustworthiness and competence perceptions. * Damaged business angels' trust related to competence perceptions can be repaired; destroyed business angels' trust related to trustworthiness perceptions cannot. * Business angels' trust triggers favourable investment, reinvestment and recommendation decisions in the Valley of Death. * Personal and collective trust positively affect investment and reinvestment decisions. * Personal, collective and institutional trust positively affect recommendation decisions. Abstract This paper explores and explains how, why and with what consequences business angels' trust in the entrepreneur affects their decisions to invest, reinvest or withdraw funding in the Valley of Death (VoD). Drawing on the VoD literature and on business angel research, we retrospectively study two contrastive cases of success and failure of French start-ups operating in the IT sector over a period of two and nine years, respectively, by taking the dyadic relationship between business angels and entrepreneurs as unit of analysis. We document the business angels' trust evolution over time and we show how trust shifts facilitate or damage the entrepreneurs' journey through the VoD. We offer a process-model of sustaining business angels' trust in entrepreneur-business angel relationships to cross the VoD, thus addressing recent calls for more in-depth examinations of social aspects in investment and post-investment business angel research. Author Affiliation: (a) Associate Professor of Entrepreneurship, Audencia Business School, 8 route de la Jonelière -- BP 31222 -- Nantes Cedex 3, Nantes, France (b) Professor of Entrepreneurship, Audencia Business School, Nantes, France * Corresponding author. Article History: Received 1 September 2018; Revised 22 June 2020; Accepted 24 June 2020 Byline: Vincent Lefebvre [vlefebvre@audencia.com] (a), Gilles Certhoux [gcerthoux@audencia.com] (b), Miruna Radu-Lefebvre [mradu@audencia.com] (b,*)

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Gale Document Number: GALE|A684964843