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

Forthcoming Papers

“Passivity on the Board of Directors” by Chris Yung

“Racial Disparities in Mortgage Lending: New Evidence based on Processing Time” by Bin Wei Federal and Feng Zhao