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

Thomas Hellmann () and Veikko Thiele

Journal of Financial Economics, 2015, vol. 115, issue 3, 639-653

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.

Keywords: Entrepreneurship; Angel investors; Venture capital; Start-ups; Search (search for similar items in EconPapers)
JEL-codes: D53 D83 G24 L26 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (54)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X14002311
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Friends or Foes: The Interrelationship between Angel and Venture Capital Markets (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:115:y:2015:i:3:p:639-653

DOI: 10.1016/j.jfineco.2014.10.009

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().