Understanding Differences in Expectations in the Anticipatory Socialization Process between Angel Investors and Entrepreneurs in Extended Due Diligence A dissertation presented to the faculty of Ohio University In partial fulfillment of the requirements for the degree Doctor of Philosophy Joseph D. Fox May 2019 © 2019 Joseph D. Fox. All Rights Reserved. 2 This dissertation titled Understanding Differences in Expectations in the Anticipatory Socialization Process between Angel Investors and Entrepreneurs in Extended Due Diligence by JOSEPH D. FOX has been approved for the department of Educational Studies, the department of Management, and the Graduate College by David R. Moore Professor of Educational Studies David Koonce Interim Dean, Graduate College 3 Abstract FOX, JOSEPH D, Ph.D., May 2019, Individual Interdisciplinary Program Entrepreneurship and Instructional Technology Understanding Differences in Expectations in the Anticipatory Socialization Process between Angel Investors and Entrepreneurs in Extended Due Diligence Director of Dissertation: David R. Moore Angel investors provide billions of dollars in capital to entrepreneurs in the United States each year. The money provided to these early-stage companies is critical for growth and expansion of these young businesses with uncertain futures. As founders interact with angel investors and the groups they form to invest in such opportunities through due diligence, each party acts upon expectations generated from a process known as anticipatory socialization. This thesis investigates anticipatory socialization in the context of entrepreneurial learning from the perspectives of entrepreneurs and angel investors. Using a mix of interviews and a case study, this exploration of the social environment uncovers the various expectations guiding the due diligence process. A documentation analysis provides data on the stated criteria and goals that each angel investor group enters due diligence with. The result of these efforts produces comprehensive learning objectives useful to guide the development of an instructional device aimed at assisting students in better understanding the anticipatory socialization process in angel investing. Since due diligence and evaluation of founders begins much earlier than entrepreneurs expect, the entrepreneur should undertake their own due 4 diligence to discover more about the expectations of angel investors. They also must engage in self-reflection to understand their own position within the social space. 5 Dedication I dedicate this work to my wife, Alexa, and our son. 6 Acknowledgments I would like to thank Dr. David Moore, Dr. Luke Pittaway, Dr. Ikenna Uzuegbunam, and Dr. Kamile Geist, for their tireless feedback and guidance during my program. I also owe a debt of gratitude to the angel investors, angel investor groups, entrepreneurs, and other entrepreneurial support groups that allowed me to discuss my ideas with them along the way. I would like to acknowledge the support and feedback provided by the faculty at Ohio University and The University of Akron. I would also like to thank my wife, Alexa, for all her support and encouragement during my doctoral studies. You and our son have kept me motivated through this process! Thank you to Dan, Judy, Jim, Karen, John, Christy, Emily, Erika, Mark, and Hazel for all your support in completing this work. 7 Table of Contents Page Abstract ...........................................................................................................................3 Dedication .......................................................................................................................5 Acknowledgments ...........................................................................................................6 List of Tables................................................................................................................. 11 List of Figures ............................................................................................................... 12 Prologue ........................................................................................................................ 13 Chapter 1: Introduction .................................................................................................. 14 Statement of Problem ............................................................................................... 14 Purpose of the Study ................................................................................................ 16 Theoretical Framework ............................................................................................ 18 Entrepreneurial learning and socialization. ......................................................... 18 Chapter 2: Literature Review ......................................................................................... 27 Introduction ............................................................................................................. 27 Section 1: Angel Investing ....................................................................................... 29 Why angel investing? ......................................................................................... 29 Types of entrepreneurial financing. .................................................................... 29 Angel investors. ................................................................................................. 33 Entrepreneur expectations of angel investors. ..................................................... 44 Section 2: Entrepreneurial Learning ......................................................................... 46 Introduction to entrepreneurial learning. ............................................................. 46 Angel investors and entrepreneurial learning. ..................................................... 56 Section 3: Development of Learning Objectives....................................................... 64 Introduction. ...................................................................................................... 64 Serious games. ................................................................................................... 64 Simulations. ....................................................................................................... 65 Revised taxonomy of educational objectives. ..................................................... 71 Chapter 3: Methodology ................................................................................................ 76 Grounded Theory ..................................................................................................... 76 Philosophical Assumptions ...................................................................................... 77 Ontological assumptions. ................................................................................... 78 8 Epistemological assumptions. ............................................................................ 80 Human nature..................................................................................................... 81 Research Design ...................................................................................................... 82 Methods ................................................................................................................... 83 Interviewing. ...................................................................................................... 83 Reflexivity. ........................................................................................................ 85 Self as researcher. .............................................................................................. 86 Documentation analysis. .................................................................................... 87 Sampling. ........................................................................................................... 89 Data Collection and Analysis Procedures ................................................................. 91 Data collection. .................................................................................................. 91 Data analysis. ..................................................................................................... 92 Protection of human rights and risks to participants. ........................................... 94 Limitations. ........................................................................................................ 94 Chapter 4: Findings and Data ......................................................................................... 96 Data Collection and Coding ..................................................................................... 96 Interviews ................................................................................................................ 96 Coding ..................................................................................................................... 98 First round – open coding. .................................................................................. 98 Findings – Angel Investors .................................................................................... 102 Angel investors. ............................................................................................... 103 Angel Expectations ................................................................................................ 116 Angel investor learning. ..................................................................................