From angel investors to venture capital: fundraising pathways and financial viability in professional esports teams

In this paper, we shed light on interactions among the various investors operating within the entrepreneurial finance ecosystem. Specifically, we aim to investigate what business angel (BA) investment practices are correlated with follow‐on venture capital (VC) financing, and uncover the strategies that determine a complementary‐based or a substitution‐based relationship with VCs. We analysed a sample of 176 companies that received a BA investment during 2008–2016 and collected financial data over a 10‐year period after the BA investment. The data examined indicate that BAs’ selectivity, as measured by their rejection rate, and BAs’ affiliation to an angel network, are positively related with the probability of raising follow‐on VC financing. However, a high level of BAs’ monitoring activity negatively influences the probability of obtaining VC funding. Interestingly, BA networks do affect this relationship. The positive impact of BAs’ rejection rate is informative for VC decisions if the BA does not invest through a network. Conversely, a high level of monitoring may convey a negative signal for VC, particularly if the BA is affiliated to a network. These results extend our knowledge of the investment practices of BAs and their role in allowing angel‐backed companies to raise follow‐on VC financing.

Capital problems are the most important to solve for almost all entrepreneurs, especially for those involved in activity of high level of innovation. The main solution which led to getting a mature innovative firm is a venture capital involvement in form of business angels, venture capital funds or seed funds. A cradle of venture capital market activity is the United States of America, but also in better developed countries in Europe such activity is also flourishing, e.g. in the United Kingdom, France, Germany, Scandinavian countries. In other EU countries, especially new members, venture capital market has not as yet been developed, but it is still growing together with the increase of the level of innovation and entrepreneurial activities. Filling up the capital gap in the very start of innovative companies such institutions as incubators, business angels and various kinds of advisors have played a key role. The main, complementary to each other, sources of early stage of venture projects are business angels (informal venture capital): high net worth individuals, senior managers from large companies, or serial entrepreneurs, who invest (on their own or in groups) a small proportion of their own wealth in SMEs, and venture capital firms (formal venture capital): firms which manage fixed life venture capital funds of banks, pension funds and financial institutions, and other investors (wealthy families, corporations). Together with development of business angel market and enforcing their significance as a source of entrepreneurship financing on start-up stage, and overall economy growth, business angel market has gone under some transformations, like a globalization of business angel conception, growing number of successful projects, of mentality in approach to entrepreneurship, and closing relations between venture capital funds and business angels. Informal venture capital market of business angels in Europe is much less developed than institutional one. The biggest number of business angels in Europe acts in three countries: the United Kingdom, France and Germany. Along an increase of a number of business angels and expanding an area of their activity single business angels lave been associated with business angel networks. The number of such networks in Europe systematically rises. In a half of 2005 there were 228 networks with 12 773 business angels in EU. Activity of business angels in Poland has been developed in fact slowly, but lately there is noticed a growth of interest from either entrepreneurs or capital owners. Undoubtedly an increase of business angels and business angel network activities has been caused by Poland access to EU. After 6 months of 2007, according to the data of European Business Angels Network – EBAN, there have acted three business angel networks in Poland, such as:PolBAN. Lewiatan Business Angels, and SilBAN. Together with putting more impact on innovations and possibility of financing such activity from EU funds the networks of business angels have sprouted all over the country.

The first chapter of this thesis studies the role of angel finance in the early-stage capital market. Despite anecdotal evidence connecting angel and venture capital (VC) financing, there is little systematic evidence on how the two early-stage capital sources interact. To study this topic, I assemble the first comprehensive dataset on angel financing and characterize its size, scope, and role in the early-stage capital market. I use the population of newly incorporated startups located in California, the largest VC financing state in the United States. Here, the angel capital market is large: approximately 4% of all startups receive angel financing within three years of incorporation. At least five times as many startups receive financing from angels as from VCs in the VC-active industries. Using local individual income as an instrument for angel financing at the zip code level, I show that angels play both supportive and competitive roles in relation to VCs. Angel financing leads to more VC follow-on financing over firms’ life cycles (complement), while it crowds out VC financing from the initial financing round (substitute). My results demonstrate the explicit role of angel financing in the early-stage capital market. In the second chapter, I develop a game-theoretic model to study information asymmetries in the evolving equity crowdfunding market. I assume (1) there are two types of investors: informed (insiders) and uninformed (outsiders); (2) the insiders invest first; and (3) the outsiders observe the aggregate of insiders' actions and then decide whether to invest. Under these assumptions, I prove that there does not exist a crowdfunding market equilibrium in which the insiders' information is aggregated and high quality startups are funded with higher chances. I then use data from Regulation crowdfunding (Title III equity crowdfunding), and provide evidence that is consistent with the model implications. My results suggest that adverse selection is a primary barrier to equity crowdfunding, and new market designs are required to better develop this market. The third chapter is joint work with Matt Elliott. We model firms as sets of scarce capabilities, where each capability provides a source of competitive advantage in some markets. Each market is also associated with a set of capabilities that are valued by it. Firm and market hypergraphs represent this information. Our approach provides a new perspective on several industrial organization literatures including merger analysis, strategic alliances and industry dynamics. We argue that merger analysis should be more holistic and that profitable joint ventures increase consumer surplus even when they reduce competition. We also provide formal foundations for a prominent theory of competitive advantage in the management literature.

Start-up subsidies and the sources of venture capital

Bank Entry Into the Venture Capital Industry

Innovation in Health Care: Time for a Gut Check

Skin in the Game: An Analysis of Venture Capital Investment in Dermatology from 2002 to 2021

Research suggests that public subsidies for newly founded firms have a positive effect on follow-on financing, in particular, Venture Capital (VC). This study differentiates between Government VC, Independent VC, Corporate VC, and Business Angels and shows that public subsidies are not relevant for all of these sources. When accounting for firm characteristics that drive both selection into public subsidies as well as into VC financing through econometric matching techniques, we find that subsidies are only linked to Government VC and Business Angel financing

Signaling and Self-regulation in Venture Capital

- In this paper we study the effect of venture capital (VC) financing on firms' investments in a longitudinal sample of 374 Italian unlisted new-technology-based firms (NTBFs) observed over the 10-year period from 1994 to 2003. In particular, we consider the influence of VC on both firms' investment levels and the sensitivity of investments to firms' cash flows. We also distinguish the effects of VC financing according to the type of investor: financial VC (FVC) investors and corporate VC (CVC) investors. We show that the investment rate of Italian NTBFs is strongly and positively correlated with their current cash flows. We also find that after receiving VC financing, NTBFs increase their investment rate independently of the type of VC investor. Even though, on average, VC financing seems not to affect the sensitivity of investments to cash flows, we have found that there is substantial heterogeneity according to the type of VC investor. In fact, CVC-backed firms still exhibit positive investment-cash flow sensitivity. Conversely, when firms receive VC financing from an FVC investor, the sensitivity of investments to cash flows disappears. Therefore, while this study clearly indicates that VC financing is beneficial to NTBFs, it also suggests that managers of NTBFs looking for external financing should be aware that the nature of these benefits depends crucially on the type of investor. . Keywords: investment, new technology-based firm, pecking order, venture capital, corporate venture capital Parole chiave: investimenti, imprese ad alta tecnologia, pecking order, venture capital, corporate venture capital . Jel Classification: G32 - D92 - G23

This report looks at venture capital (VC) funds, their characteristics, and functioning. It specifically focuses on the relationship between VCs and innovation, investigating whether VC funds encourage innovative companies to innovate or whether they successfully predict which companies will innovate more. \n\nThe report also focuses on the selection process at micro-level. VC funds invest in young and innovative companies and decide where to invest based on imperfect information and signals. The ICT industry has a number of young innovative companies. VC funds have unsurprisingly concentrated their efforts into the ICT industry. In 2013, about 25% of invested funds went into ICT companies even though ICT companies represent less than 6% of all companies. \n\nThe report then steps back to look at the macro-level. Once they have invested, VC funds use stage financing, monitoring, and exit incentives to re-align their incentives with those of the company receiving the funds. Since they rely on monitoring, VC funds usually prefer to invest in local companies that they can visit regularly. This issue of local investment is seen as a hindrance and EU policymakers have tried to remedy to this issue: the EU has passed a regulation to facilitate the cross-border funding; and the EU has partly funded the European Investment Fund to further encourage investment and cross-border investment.

The impact of venture capital funds with foreign limited partners investment on enterprise internationalization: evidence from China

Signaling by early stage startups: US government research grants and venture capital funding

Reliance upon informants in the venture capital industry

Given the increasing popularity of crowdfunding as a new means to finance entrepreneurial ventures, we assess whether and how crowdfunding campaign‐specific signals that affect campaign success influence venture capitalists’ selection decisions in ventures’ follow‐up funding process. Our study relies on cross‐referencing a proprietary data set of 56,000 crowdfunding campaigns that ran on Kickstarter between 2009 and 2016 with 100,000 investments in the same period from the Crunchbase data set. Drawing on signaling theory and the microfinance literature, our empirical findings reveal that a successful crowdfunding campaign leads to a higher likelihood to receive follow‐up venture capital (VC) financing, and that there exists an inverted U‐shaped relationship between the funding‐ratio and the probability to receive VC funding. Further, we find statistical evidence that an endorsement by the platform provider has a likewise positive impact on the receipt of VC. Contrary to our expectations, word‐of‐mouth volume seems to be a negligible factor when it comes to follow‐up VC financing. Our results support the view that crowdfunding signals are factored into the VC’s funding decision in order to evaluate the potential of entrepreneurial ventures.