Business angel early stage decision making

Using 150 interactions between entrepreneurs and potential investors, we study early stage business angel decision making. We show that contrary to the majority of past research that suggests they should, angel investors do not use a fully compensatory decision model wherein they weight and score a large number of attributes. Rather, they use a shortcut decision making heuristic known as elimination-by-aspects to reduce the available investment opportunities to a more manageable size. If an opportunity is diagnosed with a fatal flaw, it is rejected in the first stage of the decision making process, but all opportunities with no fatal flaws do progress beyond that stage.