Incentivizing angels to invest in start-ups: Evidence from a natural experiment

Eliran Solodoha, Stav Rosenzweig*, Shai Harel

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

3 Scopus citations


Business angels who invest in start-ups are important not only because of their input of financial capital, but even more so because of their experience and skill. Recognizing these benefits, policies that encourage business angels to invest in start-ups are very popular across countries. We use a natural experiment setting to examine the effect of such a policy on the number of angels investing in each start-up targeted by the incentivizing policy. Using data on 6840 Israeli start-ups in seven high-tech industries with 9095 angels, we find that a policy encouraging angels to invest in seed-stage start-ups effectively reduced the number of angels investing in each firm. Evidence suggests that the investments by angels in these start-ups also decreased compared to what would have been expected in the absence of the incentive policy. Interviews we conducted with angels shed some light on potential reasons for the decline. We discuss potential policy implications.

Original languageEnglish
Article number104634
JournalResearch Policy
Issue number1
StatePublished - Jan 2023
Externally publishedYes


  • Angels
  • Natural experiment
  • Public policy
  • Start-ups
  • Tax incentive


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