An Empirical Analysis of the Driving Forces Behind ‘Angel Investors’ Investment Decisions: Evidence from India

Abstract

Business angels, as key providers of capital financing, are informal investors who often support innovative ventures. Their investment decision-making process is inherently complex and evolves over time. Understanding this process is critical for enhancing the strategic approaches of business angels and guiding entrepreneurs seeking such investment. This study identifies and models the key factors influencing angel investment decisions in the context of entrepreneurship and classifies them into four clusters for improved clarity and application. Data were collected through a primary survey of business angels and an extensive literature review. The Interpretive Structural Modelling (ISM) method was employed to establish a structural framework of the factors, while MICMAC analysis was used to categorise them into clusters based on their driving and dependence power. The findings indicate that business angels investing in entrepreneurial ventures should prioritise strategies centred on the nature of the product or service, the venture’s potential impact, and related financial considerations. Entrepreneurs, in turn, should clearly articulate the required capital, anticipated returns, and the measurable value proposition of their ventures. The proposed framework and clustering provide practical insights for refining investment decisions and enhancing the attractiveness of entrepreneurial projects to angel investors.