Equity Investment by Startup Board Members Can Attract New Capital

Abstract

Potential outside investors generally do not want to be the first person to write a check to the startup. They look for previous financial investment from the founders, friends and family, and outside members of the board of directors as evidence that the entrepreneurs are serious and legitimate. Data from the Q4 2017 Pepperdine Private Capital Access Survey shows a positive and significant relationship between revenue growth and outside director investment in the startup.

Keywords: Small Business, Entrepreneurship, Startups, Angel Investment, Venture Capital, Governance

JEL Classification: G24, G34, L26, M13