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A comparison of the effect of angels and venture capitalists on innovation and value creation

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  • Dutta, Supradeep
  • Folta, Timothy B.

Abstract

We examine the extent to which private equity investors generate value-added benefits to venture development and investigate whether these benefits differ across angel groups and venture capitalists. This is the first study to compare the relative contributions to venture innovation and successful exits by angel groups versus venture capitalists. We do so by tracking external investments in 350 technology ventures. The results suggest that VCs and angel groups contribute equally to innovation rates, but these effects are non-additive. We also show, however, that VC-backed ventures have more impactful innovations and experience faster commercialization rates.

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  • Dutta, Supradeep & Folta, Timothy B., 2016. "A comparison of the effect of angels and venture capitalists on innovation and value creation," Journal of Business Venturing, Elsevier, vol. 31(1), pages 39-54.
    • Handle: RePEc:eee:jbvent:v:31:y:2016:i:1:p:39-54
    DOI: 10.1016/j.jbusvent.2015.08.003
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    More about this item

    Keywords

    Value creation; Venture capital; Angel investment; Innovation; Patents;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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