Co-Investment Networks of Business Angels and the Performance of Their Start-Up Investments

Abstract

The venture capital literature has established the positive impact of coinvestment networks on the performance of start-up investments. In early stages, however, often angel financing is the primary source of external equity. Using a novel in-depth data set of U.S. high technology start-ups we investigate the effects of business angel networks. Start-ups of better connected angel investors are more likely to receive subsequent funding by venture capitalists and business angels more often exit successfully. Thereby, angel investors seem to rely on their direct contacts, whereas their network position and possibility to act as information brokers plays a far lesser role.

Keywords: business angel, start-up, venture capital, networks, social capital, entrepreneurship

JEL Classification: A14, C23, G24, M13