Journal of Financial Economics Vol. 115 No. 3 2015
Friends or foes? The interrelationship between angel and venture capital markets
Abstract
This paper develops a theory of how angel and venture capital markets interact. Entrepreneurs first receive angel then venture capital funding. The two investor types are ‘friends’ in that they rely upon each other׳s investments. However, they are also ‘foes,’ because at the later stage the venture capitalists no longer need the angels. Using a costly search model we derive the equilibrium deal flows across the two markets, endogenously deriving market sizes, competitive structures, valuation levels, and exit rates. We also examine the role of legal protection for angel investments.
- DOI
- 10.1016/j.jfineco.2014.10.009
- Volume
- 115
- Issue
- 3
- Pages
- 639-653
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref