Raising capital for rapid growth in young technology ventures: when business angels and venture capitalists coinvest

Christophe Bonnet and Peter Wirtz

Venture Capital, 2011, vol. 14, issue 2-3, 91-110

Abstract: We investigate the relational dynamics of raising equity finance to support strong growth in a technology venture when different investor types (business angels and venture capitalists) coinvest. Our objective is to ascertain which of two theoretical frameworks, agency theory or the cognitive approach to entrepreneurial finance, is the strongest predictor of the interactions between investors and entrepreneurs. We conducted a prospective case study whose analysis yields overall support for both approaches, while it also indicates that the relevance of agency-related and cognitive concerns clearly depends on the stage of the process and on investor-type. We conclude that first-time entrepreneurs may have an interest in addressing both formal and informal venture capitalists and that the proper timing and combination of investor-profiles may help to lower the cost of capital and contribute to future growth.

Date: 2011
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Working Paper: Raising capital for rapid growth in young technology ventures: when business angels and venture capitalists coinvest (2012)
Working Paper: Raising capital for rapid growth in young technology ventures: when business angels and venture capitalists coinvest (2012)
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DOI: 10.1080/13691066.2012.654603

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