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Raising capital for rapid growth in young technology ventures: when business angels and venture capitalists coinvest

Author

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  • Peter Wirtz

    (Laboratoire de Recherche Magellan - UJML - Université Jean Moulin - Lyon 3 - Université de Lyon - Institut d'Administration des Entreprises (IAE) - Lyon)

  • Christophe Bonnet

    (GDF - Gestion, Droit et Finance - EESC-GEM Grenoble Ecole de Management)

Abstract

We investigate the relational dynamics of raising equity finance to support strong growth in a technology venture when different investor types (business angels and venture capitalists) coinvest. Our objective is to ascertain which of two theoretical frameworks, agency theory or the cognitive approach to entrepreneurial finance, is the strongest predictor of the interactions between investors and entrepreneurs. We conducted a prospective case study whose analysis yields overall support for both approaches, while it also indicates that the relevance of agency-related and cognitive concerns clearly depends on the stage of the process and on investor-type. We conclude that first-time entrepreneurs may have an interest in addressing both formal and informal venture capitalists and that the proper timing and combination of investor-profiles may help to lower the cost of capital and contribute to future growth.
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Suggested Citation

  • Peter Wirtz & Christophe Bonnet, 2012. "Raising capital for rapid growth in young technology ventures: when business angels and venture capitalists coinvest," Grenoble Ecole de Management (Post-Print) halshs-00666416, HAL.
    • Handle: RePEc:hal:gemptp:halshs-00666416
    DOI: 10.1080/13691066.2012.654603
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00666416
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    Cited by:

    1. Cumming, Douglas & Groh, Alexander Peter, 2018. "Entrepreneurial finance: Unifying themes and future directions," Journal of Corporate Finance, Elsevier, vol. 50(C), pages 538-555.
    2. Laurence Cohen & Peter Wirtz, 2022. "Decision-making style in entrepreneurial finance and growth," Small Business Economics, Springer, vol. 59(1), pages 183-210, June.
    3. Christophe Bonnet & Laurence Cohen & Peter Wirtz, 2015. "Angel Cognition and Active Involvement in BAN Governance and Management," Working Papers hal-01182804, HAL.
    4. Bonini, Stefano & Capizzi, Vincenzo & Zocchi, Paola, 2019. "The performance of angel-backed companies," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 328-345.
    5. Peter Wirtz & Christophe Bonnet & Laurence Cohen & Christophe Haon, 2020. "Investing Human Capital: Angel Cognition and Active Involvement in Business Angel Groups," Post-Print halshs-02374570, HAL.
    6. Franziska Schlichte & Sebastian Junge & Jan Mammen, 2019. "Being at the right place at the right time: does the timing within technology waves determine new venture success?," Journal of Business Economics, Springer, vol. 89(8), pages 995-1021, December.
    7. Johannes Wallmeroth & Peter Wirtz & Alexander Peter Groh, 2017. "Institutional Seed Financing, Angel Financing, and Crowdfunding of Entrepreneurial Ventures: A Literature Review," Working Papers hal-01527999, HAL.
    8. Christophe Bonnet & Peter Wirtz & Martine Séville, 2013. "Nascent Governance: The Impact Of Entrepreneurial Finance On Board Formation And Roles," Grenoble Ecole de Management (Post-Print) halshs-00850021, HAL.
    9. Laurence Cohen & Peter Wirtz, 2018. "Caractéristiques des entrepreneurs, finance entrepreneuriale et trajectoires de croissance," Working Papers hal-01723858, HAL.
    10. Peter Wirtz, 2015. "Entrepreneurial Finance and the Creation of Value: Agency Costs vs. Cognitive Value," Post-Print hal-01178314, HAL.
    11. Bonnet, Christophe & Capizzi, Vincenzo & Cohen, Laurence & Petit, Aurelien & Wirtz, Peter, 2022. "What drives the active involvement in business angel groups? The role of angels' decision-making style, investment-specific human capital and motivations," Journal of Corporate Finance, Elsevier, vol. 77(C).
    12. Sofia Johan & Minjie Zhang, 2021. "Information Asymmetries in Private Equity: Reporting Frequency, Endowments, and Governance," Journal of Business Ethics, Springer, vol. 174(1), pages 199-220, November.
    13. Laurence Cohen & Kirsten Burkhardt, 2019. "Entrepreneurs (novices vs. experts) and investors: Interaction and rationality dynamics (effectual vs. causal) [Entrepreneurs (novice vs. expert) et investisseurs : interactions et dynamique des ra," Post-Print hal-02177388, HAL.

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