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Seed-Stage Success and Growth of Angel Co-investment Networks

Author

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  • Buvaneshwaran Venugopal
  • Vijay Yerramilli

Abstract

Using hand-collected data, we show that coinvestment is widespread in the angel investment market, even among seed-stage startups. Individual angels with demonstrated seed-stage success experience an increase in the quantity, quality, and geographic and industry spread of their coinvestment connections relative to unsuccessful peers and are rewarded with more deal flow. These results are stronger for less-established angels and for angels whose successes are more indicative of their ability. Success also begets more success: the portfolio companies of successful angels are more likely to receive follow-on financing, especially from VC firms. Our results highlight how angels grow their coinvestment networks. (JEL G24, L14, L26, M13).

Suggested Citation

  • Buvaneshwaran Venugopal & Vijay Yerramilli, 2022. "Seed-Stage Success and Growth of Angel Co-investment Networks," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 11(1), pages 169-210.
    • Handle: RePEc:oup:rcorpf:v:11:y:2022:i:1:p:169-210.
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    File URL: http://hdl.handle.net/10.1093/rcfs/cfab016
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    More about this item

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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