Are Angels Different? An Analysis of Early Venture Financing

54 Pages Posted: 19 Mar 2008 Last revised: 29 Oct 2014

Brent D. Goldfarb

University of Maryland - Robert H. Smith School of Business

Gerard Hoberg

University of Southern California - Marshall School of Business

David Kirsch

University of Maryland

Alexander J. Triantis

University of Maryland - Robert H. Smith School of Business

Date Written: November 4, 2013

Abstract

We examine the role of angel investors in early venture financing using a unique sample of 182 Series A preferred stock rounds. Our sample includes deals in which angels invest alone, VCs invest alone, and where both investor types co-invest. We find that deals with more angel investors have weaker cash flow and control rights, and experience longer times to resolution. Among larger deals, those financed by VCs alone are most likely to experience successful liquidation. Our overall results support the conclusion that angel objectives likely align more with entrepreneurs than VCs, and that outcomes may be linked to conflicts of interest.

Keywords: Venture Capital, Angel Investors, Entrepreneurship, Control Rights, Term Sheets

JEL Classification: G20, G24, G32

Suggested Citation

Goldfarb, Brent D. and Hoberg, Gerard and Kirsch, David and Triantis, Alexander J., Are Angels Different? An Analysis of Early Venture Financing (November 4, 2013). Robert H. Smith School Research Paper No. RHS 06-072. Available at SSRN: https://ssrn.com/abstract=1024186 or http://dx.doi.org/10.2139/ssrn.1024186

Brent D. Goldfarb (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States
301-405-9672 (Phone)
301-314-8787 (Fax)

Gerard Hoberg

University of Southern California - Marshall School of Business ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

HOME PAGE: http://www-bcf.usc.edu/~hoberg/

David Kirsch

University of Maryland ( email )

College Park
College Park, MD 20742
United States

Alexander J. Triantis

University of Maryland - Robert H. Smith School of Business ( email )

Department of Finance
College Park, MD 20742-1815
United States
301-405-2246 (Phone)
301-314-9157 (Fax)

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