An Angel (Investor) in Devil’s Clothing
Today, the Conglomerate’s Junior Scholars Workshop is discussing Darian Ibrahim’s The (Not So) Puzzling Behavior of Angel Investors. I’ve offered some comments to the paper here; Larry Ribstein’s comments are here; Barbara Black’s here; and George Dent’s here.
The gist of my comment notes that Darian does a terrific job of showing that so-called angel investors’ seemingly philanthropic behavior can be explained using traditional wealth-maximizing incentive theory. For example, angels may not seek to control start-ups with formal contract mechanisms because to do so would reduce those start-ups’ abilities to find later VC investments and thus repay the angel investment. If this is a good model of angel behavior, the question I had was whether the law (or society more generally) ought to treat angels differently from other investors. I look forward to Darian’s response to this comment, and the other really thoughtful critiques. If you at all interested in the law of entrepreneurs, this is a can’t miss paper and workshop. Indeed, it has already inspired a really thoughtful comment by Jeff Lipshaw. Come on by!