Post by Gerard Hoberg on Jun 27, 2011 5:44:27 GMT 4
Does Angel Participation Matter? An Analysis of Early Venture Financing
Gerard Hoberg
University of Maryland - Department of Finance
Brent D. Goldfarb
University of Maryland - Robert H. Smith School of Business
David Kirsch
University of Maryland
Alexander J. Triantis
University of Maryland - Robert H. Smith School of Business
March 24, 2009
Robert H. Smith School Research Paper No. RHS 06-072
Abstract:
We examine the role of angel investors in early venture financing using a new sample of 182 Series A preferred stock rounds. Our sample includes deals in which angels invest alone, those where they co-invest with venture capitalists (VCs), and deals in which VCs invest alone. We find that investor composition is strongly related to control rights, and deals with more angel investors have weaker control rights. Our broad results regarding outcomes and investor selection are consistent with a constrained matching explanation regarding how firms pair with investor types. Among smaller deals, matching is unconstrained, and outcomes are not correlated with investor composition. Among larger deals, VC participation is generally a necessary condition for raising capital, and firms for which this constraint binds experience inferior outcomes.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1024186_code517200.pdf?abstractid=1024186&mirid=2
Gerard Hoberg
University of Maryland - Department of Finance
Brent D. Goldfarb
University of Maryland - Robert H. Smith School of Business
David Kirsch
University of Maryland
Alexander J. Triantis
University of Maryland - Robert H. Smith School of Business
March 24, 2009
Robert H. Smith School Research Paper No. RHS 06-072
Abstract:
We examine the role of angel investors in early venture financing using a new sample of 182 Series A preferred stock rounds. Our sample includes deals in which angels invest alone, those where they co-invest with venture capitalists (VCs), and deals in which VCs invest alone. We find that investor composition is strongly related to control rights, and deals with more angel investors have weaker control rights. Our broad results regarding outcomes and investor selection are consistent with a constrained matching explanation regarding how firms pair with investor types. Among smaller deals, matching is unconstrained, and outcomes are not correlated with investor composition. Among larger deals, VC participation is generally a necessary condition for raising capital, and firms for which this constraint binds experience inferior outcomes.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1024186_code517200.pdf?abstractid=1024186&mirid=2