The role of the exit in the initial screening of investment opportunities: The case of business angel syndicate gatekeepers

Abstract

The exit process has been largely ignored in business angel research yet, the practitioner community identifies the difficulty in achieving exits as the most pressing problem for investors. This is attributed to the failure of investors to adopt an exit-centric approach to investing. This article explores the validity of this claim analysing the investment approach of 21 ‘gatekeepers’ (managers) of angel groups in Scotland and Northern Ireland. Most gatekeepers state that they do consider the exit decision when investing. However, this is contradicted by a verbal protocol analysis which indicates that exit is not a significant consideration in the initial screening process. The small number of exits achieved by the groups is consistent with the general lack of an exit-centric approach to investinging. This lack of scrutiny upon the exit is likely to have a negative impact on the level of future angel investment activity.