Entrepreneur Heterogeneity and New Venture Financing

53 Pages Posted: 27 Jan 2015

See all articles by Elazar Berkovitch

Elazar Berkovitch

Interdisciplinary Center, Herzliyah

Yaniv Grinstein

Cornell University - Samuel Curtis Johnson Graduate School of Management; Interdisciplinary Center (IDC) Herzliyah; European Corporate Governance Institute (ECGI)

Ronen Israel

Interdisciplinary Center, Herzliyah

Date Written: January 25, 2015

Abstract

We explain the coexistence of different financiers like Venture Capital (VC) and Angel investors and study the role of policymakers in promoting innovation. VC investors are better informed. However, Angel investors offer entrepreneurs a better avenue to capture entrepreneurs' motivational factors. We show that policy measures to enhance entrepreneurial activity should focus on promoting VC ventures rather than Angel ventures. Our model implies that profitable industries and locations with better entrepreneurial ecosystems attract more Angel financing; Boom periods exhibit more Angel financing; Angel-backed ventures are smaller, and are less likely to be liquidated compared to VC-backed ventures.

Keywords: Venture Capital, Angel Financing, Entrepreneurship

JEL Classification: G24, M13, G32

Suggested Citation

Berkovitch, Elazar and Grinstein, Yaniv and Israel, Ronen, Entrepreneur Heterogeneity and New Venture Financing (January 25, 2015). Available at SSRN: https://ssrn.com/abstract=2555205 or http://dx.doi.org/10.2139/ssrn.2555205

Elazar Berkovitch

Interdisciplinary Center, Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

Yaniv Grinstein (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Sage Hall
Ithaca, NY 14853
United States
607-255-8686 (Phone)
607-254-4590 (Fax)

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Ronen Israel

Interdisciplinary Center, Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel
972-9-9527306 (Phone)

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