Business angels as accelerators of innovation

Business angels and their presence in Finland 

Among investors, who are the people allocating capital with the expectation of future financial return on investment, there is a category outlined which is called angel investors or business angels (Lin 2015). Angel investor is a “high net worth individual acting alone or in formal or informal syndicate, who invests his or her money directly in an unquoted business in which there is no family connection and who, after investment generally takes an active involvement in the business for example, as an advisor and member of the board of directors” (Mason & Harrison 2008, 309).  Since most of the angel investors are investing in the seed and early stage ventures, it helps angel investors to become influential players for commercialization of innovations (Dutta & Folta 2016, 40).  

Usually, angel investors act as a bridge between informal sector and formal venture capital sector, since angel investors are investing their own funds unlike venture capitalists who oversee the formal funds of external investors. Innovative nature of the angel investors is proven by the fact that angel investors are investing in risky ventures, which have the high probability of failure and small probability of success and impressive returns. (Ali-Yrkkö et al. 2019.) 

Image 1. Angel investors are interested in investing in the seed and early stage ventures. (Leinonen 2020)

According to Cipollone & Giordani (2019) more than half of the overall business angel investments globally are allocated to most innovative sectors such as biotechnology, ICT and environmental technology (Cipollone & Giordani 2019).  In case of Finnish angel investors, annually they make a few hundred investments into start-ups, typically operating in the knowledge-intensive industries (Ali-Yrkkö et al. 2019). Still, in Finland the importance of angel investors in fostering entrepreneurship and innovation is widely acknowledged by policy makes and the media (Lahti 2011). 

Ownership feelings driving innovation 

Recent study by Maksheeva (2020) aimed to prove the argument of Rau et al. (2018) that angel investors’ ownership feelings (further: psychological ownership) towards venture-investee can be the main driving force for the innovation activities in the venture, as the relationship between psychological ownership and entrepreneurial orientation is boosted by knowledge sharing. In this context, knowledge sharing is an exchange and mutual absorption of knowledge among individuals and groups. (Rau et al. 2018; Pittino et al. 2018.) The study also investigated the factors of the engagement of business angels during the post-investment stage by executing the series of qualitative interviews with Finnish business angels. (Maksheeva 2020.) 

The results show that deeper the psychological ownership feelings are, better the engagement of the angel investors during the post-investment stage is. In addition, respondents mentioned that if the product/service of their venture of interest would not have the innovative capabilities, they would not be interested in the engaging with that venture. Therefore, it explains the reason why researchers connected psychological ownership with innovation, as angel investors’ deep interest and engagement is a strong driver for innovation in general. (Maksheeva 2020.) 


Alexandra Maksheeva works as a project coordinator at the faculty of Technology at LAB University of Applied Sciences. The topic of business angels is relevant to her because of her work interest in business innovations. 


Ali-Yrkkö, J., Pajarinen, M. & Ylhäinen, I. 2019. Business Angel Investment, Public Innovation Funding and Firm Growth. ETLA Report No 97. [Cited 03 Dec 2020]. Available at:  

Cipollone, A. & Giordani, P. 2019. Entrepreneurs meet financiers: Evidence from the business angel market. Journal of Business Venturing. Vol. 34 (5), 1-20. [Cited 10 Dec 2020]. Available at:  

Dutta, S. & Folta, T. B. 2016. A comparison of the effect of angels and venture capitalists on innovation and value creation. Journal of Business Venturing. Vol.31, 39-54. [Cited 10 Dec 2020]. Available at: 

Lahti, T. 2011. Categorization of angel investments:  An explorative analysis of risk reduction strategies in Finland. Venture Capital, Vol. 13(1), 49-74. [Cited 10 Dec 2020]. Available at:  

Lin, T. 2015. Reasonable investor (s). Boston University Law Review. Vol. 95, 461-518.  [Cited 10 Dec 2020]. Available at:  

Maksheeva, A. 2020. Engagement of business angels during the post-investment stage. Master’s Thesis. University of Turku, Turku School of Economics. Turku. [Cited 10 Dec 2020]. Available at: 

Mason, C.M. & Harrison, R.T. 2008. Measuring business angel investment activity in the United Kingdom: A review of potential data sources. Venture Capital Vol. 10 (4), 309–330. [Cited 10 Dec 2020]. Available at: 

Pittino, D., Martínez, A. B., Chirico, F. & Galván, R. S. 2018. Psychological ownership, knowledge sharing and entrepreneurial orientation in family firms: The moderating role of governance heterogeneity. Journal of Business Research, 84 (C), 312-326. [Cited 10 Dec 2020]. Available at:  

Rau, S., Werner, A. & Schell, S. 2018. Psychological ownership as a driving factor of innovation in older family firms. Journal of Family Business Strategy, Vol. 10 (4). [Cited 10 Dec 2020]. Available at: 


IMAGE 1. Teemu Leinonen. 2020. Luonto-291. [Cited 31 March 2021]. Available at: 

Leave a comment

Your email address will not be published. Required fields are marked *