Angels and venture capitalists: Substitutes or complements?

Thomas Hellmann (), Paul Schure () and Dan H. Vo

Journal of Financial Economics, 2021, vol. 141, issue 2, 454-478

Abstract: We analyze the funding of start-up companies across financing rounds, focusing on the dynamic interactions between angel investors and venture capitalists. Using unique data from British Columbia, Canada, we show that angels and venture capitalists are dynamic substitutes. This substitutes pattern applies across the performance range of companies. It is less pronounced for serial angels. An instrumental variable analysis, based on available investor tax credits, suggests that the substitutes pattern is driven by company characteristics. Overall, the evidence points to the existence of parallel streams of angel and venture capital funding, with fewer transitions between streams than is traditionally assumed.

Keywords: Angel investors; Venture capitalists; Entrepreneurial finance; Investor dynamics; Start-up ecosystem (search for similar items in EconPapers)
JEL-codes: G24 G28 L26 M13 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:141:y:2021:i:2:p:454-478

DOI: 10.1016/j.jfineco.2021.04.001

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