Paper Spotlight: Seed-Stage Success and Growth of Angel Co-investment Networks

Buvaneshwaran Venugopal

Vijay Yerramilli

Angel investors, who invest their personal wealth, are more common than venture-capital (VC) investors in seed-stage startups. Yet, we know little about how these angel investors – with a more limited network than VCs – develop their financial networks. In a forthcoming RCFS paper, “Seed-Stage Success and Growth of Angel Co-investment Networks,” Buvaneshwaran Venugopal and Vijay Yerramilli show that co-investment is widespread among angel investors: Analyzing hand-collected data from the largest crowd-sourcing database on startup investors and from the leading online fund-raising platform for startups, the authors study how individual angel investors grow their co-investment networks. They find that seed-level “reputation,” due to successfully leading a seed-stage startup to series-A stage, increases the quantity and quality of co-investment connections of new angel investors. Success also leads to more deal flow, across various geographies and industries, and follow-on financing from VC firms. Overall, this paper provides new evidence on how individual angel investors leverage seed-level success to improve their network connectedness.

Spotlight by Isil Erel
Photos courtesy of Buvaneshwaran Venugopal and Vijay Yerramilli