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Do business angels alter the risk-return equation in early stage investments? Business angels as seen by venture capitalists in the German speaking countries

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Author Info
Heukamp, Franz () (IESE Business School)
Liechtenstein, Heinrich (IESE Business School)
Wakeling, Nick (Citigroup Corporate and Investment Bank)
Abstract

Venture capitalists in German-speaking countries do not value the contribution of business angels in co-invested deals. Business angels do not reduce the risk perceived by venture capitalists in early-stage deals, even if the business angels have what venture capitalists regard as an ideal profile. Venture capitalists also refute that deals with business angels typically generate higher internal rates of return than deals without business angels.

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Paper provided by IESE Business School in its series IESE Research Papers with number D/655.

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Length: 33 pages
Date of creation: 12 Oct 2006
Date of revision:
Handle: RePEc:ebg:iesewp:d-0655

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Keywords: Venture capital; Business Angels;

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  1. Gifford, Sharon, 1997. "Limited attention and the role of the venture capitalist," Journal of Business Venturing, Elsevier, vol. 12(6), pages 459-482, November. [Downloadable!] (restricted)
  2. Steven Kaplan & Antoinette Schoar, 2003. "Private Equity Performance: Returns, Persistence and Capital," NBER Working Papers 9807, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Fiet, James O., 1995. "Reliance upon informants in the venture capital industry," Journal of Business Venturing, Elsevier, vol. 10(3), pages 195-223, May. [Downloadable!] (restricted)
  4. Chan, Yuk-Shee & Siegel, Daniel R & Thakor, Anjan V, 1990. "Learning, Corporate Control and Performance Requirements in Venture Capital Contracts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 365-81, May. [Downloadable!] (restricted)
  5. LESHCHINSKII, Dima, 2002. "Indulgent angels or stingy venture capitalists? The entrepreneurs' choice," Les Cahiers de Recherche 769, HEC Paris. [Downloadable!]
  6. Andrei A. Kirilenko, 2001. "Valuation and Control in Venture Finance," Journal of Finance, American Finance Association, vol. 56(2), pages 565-587, 04. [Downloadable!] (restricted)
  7. James A. Brander & Raphael Amit & Werner Antweiler, 2002. "Venture-Capital Syndication: Improved Venture Selection vs. The Value-Added Hypothesis," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 11(3), pages 423-452, 09. [Downloadable!] (restricted)
  8. Steven N. Kaplan & Per Stromberg, 2003. "Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts," Review of Economic Studies, Blackwell Publishing, vol. 70(2), pages 281-315, 04. [Downloadable!] (restricted)
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  9. Gompers, Paul A, 1995. " Optimal Investment, Monitoring, and the Staging of Venture Capital," Journal of Finance, American Finance Association, vol. 50(5), pages 1461-89, December. [Downloadable!] (restricted)
  10. Gompers, Paul & Lerner, Josh, 1999. "An analysis of compensation in the U.S. venture capital partnership1," Journal of Financial Economics, Elsevier, vol. 51(1), pages 3-44, January. [Downloadable!] (restricted)
  11. Lerner, Joshua, 1998. ""Angel" financing and public policy: An overview," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 773-783, August. [Downloadable!] (restricted)
  12. Admati, Anat R & Pfleiderer, Paul, 1994. " Robust Financial Contracting and the Role of Venture Capitalists," Journal of Finance, American Finance Association, vol. 49(2), pages 371-402, June. [Downloadable!] (restricted)
  13. Landstrom, Hans, 1993. "Informal risk capital in Sweden and some international comparisons," Journal of Business Venturing, Elsevier, vol. 8(6), pages 525-540, November. [Downloadable!] (restricted)
  14. Bengt Holmstrom, 1979. "Moral Hazard and Observability," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 74-91, Spring. [Downloadable!] (restricted)
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