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http://ssrn.com/abstract=1586992
 
 

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Social Capital of Venture Capitalists and Start-Up Funding


Oliver Alexy


Technische Universität München (TUM), TUM School of Management

Jorn H. Block


University of Trier - Faculty of Management; Erasmus University Rotterdam (EUR) - Institute of Management (ERIM)

Philipp G. Sandner


Technische Universität München, TUM School of Management

Anne L. J. Ter Wal


Imperial College Business School

March 1, 2011

Small Business Economics, Vol. 39, Issue 4, pp. 835-885, 2012

Abstract:     
How does the social capital of venture capitalists (VCs) affect the funding of start-ups? By building on the rich social capital literature, we hypothesize a positive effect of VCs’ social capital, derived from past syndication, on the amount of money that start-ups receive. Specifically, we argue that both structural and relational aspects of VCs’ social networks provide VCs with superior access to information about current investment objects and opportunities to leverage them in the future, increasing their willingness to invest in these firms. Our empirical results, derived from a novel dataset containing more than 1,500 first funding rounds in the Internet and IT sector, strongly confirm our hypotheses. We discuss the implications of our findings for theories of venture capital and entrepreneurship, showing that the role and effect of VCs’ social capital on start-up firms may be more complex than previously argued in the literature.

Number of Pages in PDF File: 28

Keywords: venture capital, social capital, start-ups, social networks, structural holes

JEL Classification: G24, L26, M13

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Date posted: April 11, 2010 ; Last revised: July 30, 2014

Suggested Citation

Alexy, Oliver and Block, Jorn H. and Sandner, Philipp G. and Ter Wal, Anne L. J., Social Capital of Venture Capitalists and Start-Up Funding (March 1, 2011). Small Business Economics, Vol. 39, Issue 4, pp. 835-885, 2012. Available at SSRN: http://ssrn.com/abstract=1586992

Contact Information

Oliver Alexy (Contact Author)
Technische Universität München (TUM), TUM School of Management ( email )
Arcisstr. 21
Munich, 80333
Germany
+49-89-289-25741 (Phone)
+49-89-289-25742 (Fax)
HOME PAGE: http://www.ent.wi.tum.de
Jorn Hendrich Block
University of Trier - Faculty of Management ( email )
D-54296
Germany
Erasmus University Rotterdam (EUR) - Institute of Management (ERIM) ( email )
Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands
Philipp Sandner
Technische Universität München, TUM School of Management ( email )
Arcisstrasse 21
Munich, 80333
Germany
Anne L. J. Ter Wal
Imperial College Business School ( email )
Tanaka Building
South Kensington Campus
London, London SW7 2AZ
United Kingdom
+44 (0) 20 7594 1460 (Phone)
+44 (0) 20 7594 5915 (Fax)
HOME PAGE: http://www.anneterwal.com
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