The Relationship Between Business Angels’ Psychological Attributes and Investments in Successful Portfolio Ventures: An Empirical Investigation Using Twitter Data

Abstract

The psychological attributes of business angels are an important but understudied determinant of business angels’ investment behaviour. We derive hypotheses on how psychological attributes (i.e. clout, risk-taking, analytical thinking) affect business angels’ investments in successful portfolio ventures. Our theorized mechanisms draw on cognitive biases (i.e. overconfidence bias, loss-aversion bias, confirmation bias) to explain how business angels’ psychological attributes could affect their selection of portfolio ventures. Empirically, we perform a language-based text analysis using Twitter data to gain insights into the psychological attributes of 1511 US business angels who made 5209 investments. Our results show that the psychological attributes of clout, risk-taking and analytical thinking can indeed affect business angels’ likelihood of investing in portfolio ventures that successfully acquire follow-on funding, highlighting the importance of psychological attributes in business angel investments.