Playing the Business Angel – The Impact of Business Angel Publicity on New Venture Performance

Abstract

More and more celebrities appear as business angels (BAs) for young and innovative ventures worldwide. Celebrities, while well-known in the public eye, are typically less known for their venture valuation skills. The signaling function of celebrity affiliations through certification and quality assurance could therefore be less relevant. Nonetheless, a venture’s affiliation with a publicly known BA may still positively alter the quality perceptions of various stakeholders as publicity increases awareness, social recognition, and the ease of information processing, thereby improving the venture’s performance. Using a sample of more than 2,900 early-stage ventures that made a venture pitch during the Canadian, German, UK, or USA versions of the reality television show Dragons’ Den, we find that BA publicity has a positive impact on target firm survival, web traffic, and sales. The impact of BA publicity is particularly strong if the congruency between the investor and the target venture is high. These effects exist above and beyond potential selection effects, value-adding activities such as active involvement through board seats, and the mere fact that a funded venture has more financial resources. Our empirical findings have broader implications for BA financing and other nascent players in the entrepreneurial finance ecosystem. We also advance theories about signaling and reputation by providing a novel framework and empirical evidence regarding the role of investor publicity when studying new venture performance.