Angels in the Crowd: The Role of Social Homophily and Peer Influence in Angel Investment

Business angels are financial providers, investing their own money into high-risk entrepreneurial assets, with a different set of motivations (more intrinsically motivated) and behaviours (more actively involved) from institutional investors. We offer a conceptualization of business angels as entrepreneurial decision-makers; individuals, whose actions are socially embedded. We investigate how the choice to engage as a business angel is affected by individual experience, the corresponding social experience of peer groups, and the interplay of the two. We test a multi-level model using a large dataset containing 1,287,997 individuals across 92 countries and 15 years. Our analysis reveals that meso-level peer influence has a significant effect on the likelihood that an individual becomes a business angel. It also acts to compensate for lack of individual entrepreneurial experience."