Kerr Lerner Schoar (2011) - The Consequences Of Entrepreneurial Finance Evidence From Angel Financings

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Reference(s)

• Kerr, William, Josh Lerner, and Antoinette Schoar (2011), "The Consequences of Entrepreneurial Finance: Evidence from Angel Financings", Working Paper, Harvard University and MIT pdf

Abstract

This paper documents the role of angel group funding in the success, operations, and venture financing of high-growth start-up firms. We first show that ventures funded by angel groups experience outcomes superior to ventures rejected by the angel group on many dimensions: survival, successful exits, employment levels, patenting, web traffic, and financing. These differences exist even when creating very rigorous control groups of non-funded ventures that receive similar interest levels from the same investor at the time of the investment pitch. We further show that angel groups display strong discontinuities in their funding behavior over small changes in the collective interest levels of angels. When implementing a regression discontinuity approach around these discontinuities, we find a positive effect of angel financing on most operations of the venture. On the other hand, the findings regarding the access to additional financing are not confirmed. Overall, the results suggest that the bundle of inputs (especially non-financial) that angel investors provide have a large, positive impact on start-up ventures.