← Search

Journal of Finance Vol. 72 No. 2 2017

Attracting Early‐Stage Investors: Evidence from a Randomized Field Experiment

Shai Bernstein; Arthur G. Korteweg; KEVIN LAWS1,2,3,4,5,6,7,8

1 Northwestern University · 2 University of Southern California · 3 University of Illinois Urbana-Champaign · 4 Cornell University · 5 Foundation for Human Potential · 6 Ross University School of Medicine · 7 The University of Texas at Austin · 8 University of Amsterdam

Abstract

This paper uses a randomized field experiment to identify which start‐up characteristics are most important to investors in early‐stage firms. The experiment randomizes investors’ information sets of fund‐raising start‐ups. The average investor responds strongly to information about the founding team, but not to firm traction or existing lead investors. We provide evidence that the team is not merely a signal of quality, and that investing based on team information is a rational strategy. Together, our results indicate that information about human assets is causally important for the funding of early‐stage firms and hence for entrepreneurial success.

DOI
10.1111/jofi.12470
Volume
72
Issue
2
Pages
509-538
Language
en
Sources
bibtex:phds-export.bib openalex crossref

Cite