Most non-executive-directors appointed by early-stage startups are not investors in the startup, and only a small fraction are venture capital (VC) directors. Non-investor-directors and angel directors are more likely to be appointed when they possess experiences that founders lack and leverage their professional connections to attract new investors, directors, top executives, and potential acquirers for startups. Among early-stage startups that appoint nonexecutive directors, those with investor-directors experience better later-stage funding outcomes and a higher likelihood of exit, as well as file fewer patents and are more likely to exit via acquisitions rather than IPOs compared to similar startups with non-investor-directors.

Using hand-collected data, we show that coinvestment is widespread in the angel investment market, even among seed-stage startups. Individual angels with demonstrated seed-stage success experience an increase in the quantity, quality, and geographic and industry spread of their coinvestment connections relative to unsuccessful peers and are rewarded with more deal flow. These results are stronger for less-established angels and for angels whose successes are more indicative of their ability. Success also begets more success: the portfolio companies of successful angels are more likely to receive follow-on financing, especially from VC firms. Our results highlight how angels grow their coinvestment networks.

Industry competition shocks are major drivers of mergers and acquisitions (M&A). We document strong positive effects of competition shocks on M&A-related covenant redesign. Acquiring firms in high-competition environments are significantly more likely to undertake tender offer bond repurchases and reduce restrictions on mergers, investments, payouts, and financing, but increase change-in-control covenants. This effect is stronger for larger, more profitable firms. Moreover, announcement returns from M&A transactions of redesigning firms in more competitive settings are significantly higher, while acquisition deal premiums are lower. Our study shows the significant effect of industry competition shocks on debt recontracting in M&A.