Newly created firms and informal angel investors: A four-stage model of network development

Lloyd Steier and Royston Greenwood

Venture Capital, 1999, vol. 1, issue 2, 147-167

Abstract: Informal angel investors represent a significant source of venture capital for newly-created firms; however, the process whereby entrepreneurs access this resource has often been described as 'invisible' and in need of further study. This paper subscribes to a 'networking' or 'relational' view of economic action and reports the findings of a longitudinal study of the development and evolution of a financial network within a newly created firm. It describes the network from the time the firm was founded in 1987 until 1996, by which time the firm had raised a significant amount of venture capital and was considering going public. The findings contribute to the entrepreneurship and financial literature by focusing on how entrepreneurs become connected to angel investors and subsequently manage the process of network development. The authors propose a four-stage model: initial navigation/'kissing frogs', consolidation, enrichment, and reconfiguration.

Date: 1999
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DOI: 10.1080/136910699295947

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