University at Buffalo School of Management

22 Buffalo Business Spring 2017 Venture capital more impactful than angel investments for tech startups Technology entrepre- neurs who get funding from venture capitalists go pub- lic sooner and have more impactful innovation than those who partner with an- gel investors, according to research from the School of Management. Published in the Journal of Business Venturing, the study found that high-tech startups that received funding from ven- ture capitalists were able to fi nd a buyer or issue stock sooner than those that received angel investment — and the patents issued by venture capital-funded fi rms had greater reach. "Angels and venture capitalists are both critical to innovation in business," says study co-author Supradeep Dutta, as- sistant professor of operations management and strategy. "But it's not enough to just get a patent. You need a strong network to shape the impact of the innovation, and venture capitalists have that network." The researchers tracked external in- vestments in 350 technology ventures — 137 by angel investors and 213 by venture capitalists — and found that the limited control angel investors have on startups may undermine their ability to infl uence innovation. Prior research has studied con- tributions from venture capital investments but has not analyzed the difference between angels and venture capitalists. The study's authors say angel investors bring some benefi ts of their own, however. "While the stringent control rights that venture capitalists have can move start- ups toward success, it can also create confl ict with founders," says Dutta. "Angels, who are investing their own money, tend to be more fl exible and less focused on immediate fi nancial returns, allowing longer-term experimentation." Dutta collaborated on the project with Timothy Folta, professor and Thomas John and Bette Wolff Family Chair of Strate- gic Entrepreneurship at the University of Connecticut School of Business. x How to boost charitable giving Charities and nonprofi ts can increase engagement and revenue by setting suggested donation levels appropriate to their donors, according to new School of Management research. Published in the Journal of Marketing Research, the study found low suggested amounts increased the total number of donations, while high default amounts increased the average donation but resulted in fewer contributions overall. "About three-quarters of charities do not use suggested amounts and those that do tend to set low amounts, often out of fear of backlash from supporters," says Indranil Goswami, assistant professor of marketing. "Our research shows that high default amounts do not negatively impact donors' behavior or attitudes toward the charity or giving in general." In a series of studies — including a university fundraising campaign sent to 7,800 past donors and a hypothetical on- line drive with nearly 3,500 participants — the researchers found a low suggested amount brought in more donors, regardless of the charity and the donors' age, gender or mood. "Lower defaults are most effective when organizations are looking to cultivate their donor base," Goswami says. "Partici- pants who had not previously donated re- sponded positively to lower defaults, saying the recommended amount 'came from a trustworthy source.'" Conversely, for organizations with a strong set of annual donors, asking for a higher contribution can infl uence donors to give more. "Some people view a suggested amount as a goal set by the organization," Goswa- mi says. "People who identify strongly with your organization's mission will rise to the challenge." Goswami advises nonprofi t directors to send targeted messages with different suggested amounts based on donors' giving history. "Instead of looking only at total reve- nue, examine your donation rate and aver- age donation levels," says Goswami. "This information will help you understand your audience and tweak your communications appropriately — and potentially raise more money overall." Goswami's co-author is Oleg Urmin- sky, professor of marketing, University of Chicago Booth School of Business. x Insights Dutta Goswami Spring 2017 may undermine their ability to infl uence innovation. Prior research has studied con- tributions from venture capital investments but has not analyzed the difference between angels and venture capitalists. The study's authors say angel investors bring some benefi ts of their own, however. "While the stringent control rights that venture capitalists have can move start- ups toward success, it can also create confl ict with founders," says Dutta. "Angels, who are investing their own money, tend to be more fl exible and less focused on immediate fi nancial returns, allowing longer-term experimentation." — the researchers found a low suggested

• Cover