Friends or foes? The interrelationship between angel and venture capital markets

Hellmann, Thomas and Thiele, Veikko (2015) Friends or foes? The interrelationship between angel and venture capital markets. Journal of Financial Economics, 115 (3). pp. 639-653.

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Abstract

This paper develops a theory of how angel and venture capital markets interact. Entrepreneurs first receive angel then venture capital funding. The two investor types are ‘friends’ in that they rely upon each other׳s investments. However, they are also ‘foes,’ because at the later stage the venture capitalists no longer need the angels. Using a costly search model we derive the equilibrium deal flows across the two markets, endogenously deriving market sizes, competitive structures, valuation levels, and exit rates. We also examine the role of legal protection for angel investments.

Item Type: Article
Keywords: Entrepreneurship; Angel investors; Venture capital; Start-ups; Search; finance
Subject(s): Finance
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Date Deposited: 01 Dec 2014 10:22
Last Modified: 27 Feb 2017 11:48
Funders: Social Sciences and Humanities Research Council
URI: http://eureka.sbs.ox.ac.uk/id/eprint/5223

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