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

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  • Zhang, Junfu

    ()
    (Clark University)

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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Bibliographic 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:
Publication status: published in: Small Business Economics, 2011, 36(2), 187-208
Handle: RePEc:iza:izadps:dp2964

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

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Cited by:
  1. Oliver Alexy & Joern Block & Philipp Sandner & Anne Ter Wal, 2012. "Social capital of venture capitalists and start-up funding," Small Business Economics, Springer, vol. 39(4), pages 835-851, November.
  2. Jean Rédis & Jean-Michel Sahut, 2014. "Entrepreneuriat répété, capital organisationnel et accès au financement par capital-risque," Working Papers 2014-260, Department of Research, Ipag Business School.
  3. Junfu Zhang, 2011. "The advantage of experienced start-up founders in venture capital acquisition: evidence from serial entrepreneurs," Small Business Economics, Springer, vol. 36(2), pages 187-208, February.
  4. Colin Mason & Ross Brown, 2013. "Creating good public policy to support high-growth firms," Small Business Economics, Springer, vol. 40(2), pages 211-225, February.
  5. Vera Rocha & Anabela Carneiro & Celeste Amorim Varum, 2013. "Serial entrepreneurship, learning by doing and self-selection," CEF.UP Working Papers 1312, Universidade do Porto, Faculdade de Economia do Porto.

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