Business Angel Groups and Exit Strategies: A Mixed Methods Approach

The rise of business angel groups represents a shift in the early-stage financing landscape. This thesis examines the heterogeneity and dynamics of angel groups, focusing on two interconnected research questions: (1) How do financial capital, locus of decision-making, and formalization influence exit strategies within angel groups? and (2) How do angel groups leverage their collective
resources to implement exit strategies? In addition, the emergence of ‘hybrid angel groups’ that combine elements of both informal angel investing and formal venture capital funds is explored and conceptualized.

To address these questions, a mixed-method approach is employed. At the macro level, a survey of 160 angel groups in Sweden is analyzed, presenting four distinct clusters of angel groups, each characterized by different combinations of formalization and locus of decision-making, and associated with varying exit strategies. Financial capital emerges as a key resource, enabling angel groups to engage in larger, later-stage investments and pursue deliberate exit strategies.

At the micro level, an interview-based case study of a ‘hybrid angel group’ is conducted. Applying a dynamic capabilities view, the analysis uncovers four routines - interplay of decision-making, network utilization, dynamic risk management, and relational dynamics - through which the group leverages its resources in pursuit of exit strategies.

This thesis challenges the prevailing view of exits as incidental outcomes for business angels, presenting the deliberate and strategic approach taken by angel groups in planning and executing exit strategies. It extends prior research on the heterogeneity and professionalization of angel groups, identifying distinct archetypes and their implications for entrepreneurs seeking funding. It also discusses dynamic capabilities in the context of non-hierarchical, product-agnostic investment
firms operating in uncertain environments.