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The Advantage of Experienced Start-Up Founders in Venture Capital Acquisition: Evidence from Serial Entrepreneurs

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Author Info
Junfu Zhang () (Clark University and IZA)

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Abstract

Existing literature suggests that entrepreneurs with prior firm-founding experience have more skills and social connections than novice entrepreneurs. Such skills and social connections could give experienced founders some advantage in the process of raising venture capital. This paper uses a large database of venture-backed companies and their founders to examine experienced founders' access to venture capital. Compared to novice entrepreneurs, entrepreneurs with venture-backed founding experience tend to raise more venture capital at an early round of financing and tend to complete the early round much more quickly. In contrast, experienced founders whose earlier firms were not venture-backed do not show a similar advantage over novice entrepreneurs, suggesting the importance of connections with venture capitalists in the early stage of venture capital financing. However, when the analysis also takes into account later rounds of financing, all entrepreneurs with prior founding experience appear to raise more venture capital. This implies that skills acquired from any previous founding experience can make an entrepreneur perform better and in turn attract more venture capital.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2964.

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Length: 42 pages
Date of creation: Jul 2007
Date of revision:
Handle: RePEc:iza:izadps:dp2964

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Related research
Keywords: firm-founding experience; serial entrepreneur; venture capital;

Find related papers by JEL classification:
M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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