Informal venture capital is the most prevalent source of external equity finance for entrepreneurs’ new ventures (Sohl, 2005) and importantly plays a key role in the ‘firm size-age finance continuum’ (Berger and Udell, 1998). While progress has been made towards understanding the differences between VCs and informal investors our understanding remains incomplete for several reasons.

First, methodological differences between VC and angel studies make the direct comparison between studies’ findings difficult. Second, previous research may have been confounded by failing to distinguish between criteria used to screen opportunities and evaluate final investment choices.