The Added-Value of Network Connections in Entrepreneurial Finance
40 Pages Posted: 24 Jul 2016
Date Written: July 23, 2016
Entrepreneurs are usually exhorted to attract the best networked investors. We provide further insights into this advice by estimating network effects in the performance of entrepreneurial ventures. We show dimensions that are critical in this estimation, such as the consideration for startups’ connections, common connections among investors, and the decreasing returns to network centrality, and estimate their relative importance. We estimate networks effects using an an original database of connections among startups, investors and individuals with relevant roles in California, collected from web-based sources, resulting in a network of nearly 1 million connections.
Keywords: Entrepreneurial Finance, Investor’s value added, Networks
JEL Classification: G24,L14, M13
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