Attracting Early Stage Investors: Evidence from a Randomized Field Experiment

47 Pages Posted: 2 May 2014 Last revised: 28 Aug 2015

See all articles by Shai Bernstein

Shai Bernstein

Harvard Business School

Arthur G. Korteweg

University of Southern California - Marshall School of Business

Kevin Laws

AngelList

Date Written: August 27, 2015

Abstract

This paper uses a randomized field experiment to identify which start-up characteristics are most important to investors in early stage firms. The experiment randomizes investors’ information sets of fund-raising start-ups. The average investor responds strongly to information about the founding team, but not to firm traction or existing lead investors. We provide suggestive evidence that team is not merely a signal of quality, and that investing based on team information is a rational strategy. Altogether, our results indicate that information about human assets is causally important for the funding of early stage firms, and hence, for entrepreneurial success.

Keywords: Angel investors, early stage firms, entrepreneurship, crowdfunding, theory of the firm, portfolio selection, correspondence testing

JEL Classification: G32, L26, D23

Suggested Citation

Bernstein, Shai and Korteweg, Arthur G. and Laws, Kevin, Attracting Early Stage Investors: Evidence from a Randomized Field Experiment (August 27, 2015). Journal of Finance, Forthcoming, Rock Center for Corporate Governance at Stanford University Working Paper No. 185, Stanford University Graduate School of Business Research Paper No. 14-17, Available at SSRN: https://ssrn.com/abstract=2432044 or http://dx.doi.org/10.2139/ssrn.2432044

Shai Bernstein (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
United States

Arthur G. Korteweg

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

3670 Trousdale Parkway
Los Angeles, CA 90089
United States

HOME PAGE: http://www.marshall.usc.edu/personnel/arthur-korteweg

Kevin Laws

AngelList ( email )

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