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Attracting Early Stage Investors: Evidence from a Randomized Field Experiment

Author

Listed:
  • Bernstein, Shai

    (Stanford University)

  • Korteweg, Arthur

    (Stanford University)

  • Laws, Kevin

    (AngelList, LLC)

Abstract

Which start-up characteristics are most important to investors in early-stage firms? This paper uses a randomized field experiment involving 4,500 active, early stage investors. The experiment is implemented by AngelList, an online platform that matches investors with start-ups seeking capital. The experiment randomizes investors' information sets on start-up characteristics through the use of nearly 17,000 emails. The average investor responds strongly to information about the founding team, but not to information about either firm traction or existing lead investors. This is in contrast to the least experienced investors, who respond to all categories of information. Our results suggest that information about human assets is causally important for the funding of early-stage firms.

Suggested Citation

  • Bernstein, Shai & Korteweg, Arthur & Laws, Kevin, 2014. "Attracting Early Stage Investors: Evidence from a Randomized Field Experiment," Research Papers 3006, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:3006
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    File URL: http://www.gsb.stanford.edu/faculty-research/working-papers/attracting-early-stage-investors-evidence-randomized-field
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    Citations

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    Cited by:

    1. Erin L. Scott & Pian Shu & Roman M. Lubynsky, 2015. "Are “Better” Ideas More Likely to Succeed? An Empirical Analysis of Startup Evaluation," Harvard Business School Working Papers 16-013, Harvard Business School.
    2. Silvio Vismara, 2018. "Information Cascades among Investors in Equity Crowdfunding," Entrepreneurship Theory and Practice, , vol. 42(3), pages 467-497, May.
    3. Li, Emma & Martin, J. Spencer, 2019. "Capital formation and financial intermediation: The role of entrepreneur reputation formation," Journal of Corporate Finance, Elsevier, vol. 59(C), pages 185-201.

    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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