The prioritization of evaluation criteria used by angel investors through multiple criteria decision-making approaches: Turkish case

There is a consensus that BAs (business angels) use several predetermined criteria when deciding to invest in new ventures although they stretch from time to time. Thus, the purpose of the study is to provide/introduce country-specific new evidence as well as to address the partially lacking comprehensive understanding of BAs' decision–making criteria in Turkey to be able to reduce the level of the information asymmetry between the entrepreneur / entrepreneurial team that presents the new venture proposal and BAs or their representatives that examine it. This study focuses on the issue by investigating both the investment (either subjective or objective) acceptance/rejection criteria BAs use to decide whether the new venture proposal should advance beyond the initial screening stage to the next one and their relative weights determined through an analysis of Fuzzy Analytic Hierarchal Process (FAHP). The unique dataset on BAs' decision–making criteria is developed through a rigorous literature review (with a yield of 235 criteria) backed up by a combination of both semi-structured interviews and questionnaires at two phases. With interviews of a scholar, a BA, a successful and an unsuccessful entrepreneur, a questionnaire with five main / 27 subcriteria had been constructed in the first phase, which would let BAs compare one criterion with another through a scale, which was then asked for seven BAs to fill out to at the second phase. The results suggest that BA's investment decision in a new venture is primarily based on product, market, financials, investor–fit and entrepreneur / entrepreneurial team with relative weights of (26,64%), (23,02%), (19,02%), (16,21%) and (15,12%) respectively. When it comes to subthemes, the most important criterion is inimitable / unsubstitutable product (product) with a relative importance of (9,87%), followed by market growth rate (market), competitive advantage (market), BA's intention to support the new venture (investor–fit), high return potential (financial), product superiority (product), sales potential (product), investment costs (financial), and trustworthiness / honesty (entrepreneur / entrepreneurial team) with relative weights in order of (8,35%), (8,35%), (7,28%), (7,05%), (6,70%), (6,11%), (4,93%) and (4,84%). The criteria related to the entrepreneur's / entrepreneurial team's industrial experience, past performance, passions/self–dedication, managerial talent, and skills as well as shares in the new venture are disregarded by BAs. In addition, BAs also tend to ignore some criteria related to the market such as market size, access to market, low competitive threats and low market risk as well as an interesting product criterion of trademark of patent protection. When it comes to financials, BAs are not interested in the size, existence of exit options, and liquidity in terms of the investment they are expected to fund. BAs seem to ignore investments being whether local or not, minimization of the risk of their portfolio, alignment between their interests with the management's behaviors of a new venture as well as a desire to be involved in the new venture. The results suggest that an entrepreneur / entrepreneurial team needs to ensure at least for the initial screening phase to meet BAs' expectations to see an inimitable/unsubstitutable product with a sales and high return potential backed up by a competitive advantage in a high–growing market.