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Do Serial Entreprenuers Raise More Venture Capital?

Junfu Zhang and Ting Lu

PPIC Working Papers from Public Policy Institute of California

Abstract: We use a large database of venture-backed companies and their founders to examine whether serial entrepreneurs raise more venture capital than novice entrepreneurs. Compared to novice entrepreneurs, serial entrepreneurs who received venture capital for their previous firms tend to raise more venture capital for the current firm at an early round of financing and tend to complete the early round much more quickly. In contrast, serial entrepreneurs who were not venture-backed before do not show a similar advantage over novice entrepreneurs, suggesting the importance of previous experience with venture capitalists in the early stage of venture capital financing for subsequent firms. However, when we also consider later rounds of financing, all entrepreneurs with previous founding experience appear to raise more venture capital. Although some serial entrepreneurs have never received venture capital before, they may have acquired skills from previous founding experience that make the current firm perform better and thus attract more venture capital. In addition, we find that even when a serial entrepreneur was still a novice, he raised more venture capital than other novices, suggesting that high-ability entrepreneurs are more likely to become serial entrepreneurs.

Date: 2006-05
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Handle: RePEc:ppi:ppicwp:2006.06