Friends or foes? The interrelationship between angel and venture capital markets

Hellmann, Thomas; Thiele, Veikko

doi:10.1016/j.jfineco.2014.10.009

Cited by 137 publications

(33 citation statements)

References 34 publications

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“…A total of three papers develop theoretical models explaining the interaction between entrepreneurs, BAs and VCs in the funding process (Fairchild, ; Conti et al ., ; Hellman and Thiele, ). Finally, only a few papers explore the negotiation phase, focusing on how BAs’ contracts affect their involvement in invested firms and investments through syndicates (Kelly and Hay, ), in comparison with VCs’ contractual provisions (Ibrahim, ), and on the challenges faced by entrepreneurs in closing deals with BAs (Amatucci and Swartz, ; Douglas et al ., ).…”

Section: Main Contributions Of Ba Researchmentioning

confidence: 99%

“…This stream of literature examines the determinants of BAs’ decision‐making at both individual BAs and BA groups levels (Landström, ; Mason and Harrison, ; Saetre, ; Sørheim, ; Gimmon, ; Harrison et al ., ; Brush et al ., ; Mitteness et al ., ; Argerich et al ., ; Ding et al ., ; Rostamzadeh et al ., , ), with a specific focus on the criteria employed to reject business proposals (Maxwell et al ., ; Carpentier and Suret, ), in comparison with the decision‐making criteria adopted by other types of investors, such as VCs and bankers (Haar et al ., ; Fiet, ,b; Guild and Bachher, ; Mason and Stark, ; Gimmon, ; Ibrahim, ; Fairchild, ; Conti et al ., ; Hsu et al ., , ; Hellman and Thiele, ).…”

Section: Main Contributions Of Ba Researchmentioning

confidence: 99%

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Business Angels Research in Entrepreneurial Finance: A Literature Review and a Research Agenda

Tenca

Croce

Ughetto

2018

Journal of Economic Surveys

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Since the seminal works of Wetzel, research on business angels (BAs) has emerged as a new and promising research field. This review analyses the current knowledge on BAs, identifying the main contents and outcomes. We also provide a bibliometric analysis to illustrate the evolution of the research field, the level of dispersion of the scientific community, the main outlets for publication and the different methodological approaches adopted. Through the analysis of backward and forward citations, we depict the current knowledge base on which BA research is grounded and whether it has any impact on other research fields.

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Section: Main Contributions Of Ba Researchmentioning

confidence: 99%

Section: Main Contributions Of Ba Researchmentioning

confidence: 99%

Business Angels Research in Entrepreneurial Finance: A Literature Review and a Research Agenda

Tenca

Croce

Ughetto

2018

Journal of Economic Surveys

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“…After all, termination of an existing investment is a significant decision because it affects not only the financial performance of a VC firm, but also the relationships and future interactions among VC firms. The extant work on VC investment termination primarily focus on how VC firms balance its investment portfolio and make termination decisions based on payoff calculation with a real option or game theory perspective (Hellmann and Thiele, ; Li and Chi, ). However, almost all VC investment termination studies are built upon VC industries in well‐established institutional environments such as the US.…”

Section: Introductionmentioning

confidence: 99%

Resource Dependence and Network Relations: A Test of Venture Capital Investment Termination in China

Zheng

Xia²

2017

J Management Studies

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This study examines how venture capital (VC) firms terminate investments in an emerging economy context. We contend that due to the weak institutional environment, it is appropriate to draw on insights from power and social relation perspectives for a better understanding of the phenomenon. Specifically, we argue that a termination decision hinges on not only the dependence relationship between a VC firm and its portfolio companies, but also the social relationships among VC firms. Event history analyses of approximately 12,000 VC deals made in China between 2001 and 2012 reveal that when a VC firm has a greater number of investments in an industry, it is more likely to terminate investments on a portfolio company in that industry. Moreover, such effect on termination is moderated by the focal VC's embeddedness with its syndicate partners and collaboration opportunities with other VC firms outside the immediate access of the syndicate partners. Our study sheds light on research on VC decision making in emerging markets by integrating insights from resource dependence relationships and interorganizational network characteristics.

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“…Hellmann and Thiele (2015) use a costly search model on deal flows between the angel and VC markets to obtain an equilibrium relationship that endogenously characterizes market sizes, valuation levels, and exit rates. Our analysis incorporates double-sided hazard but abstracts over issues related to the mode of exit as our primary focus is on understanding how heterogeneity in financier risk preferences interacts with important venture characteristics (e.g., project risk, initial value, financier/entrepreneur productivities) to shape funding outcomes under competitive search by entrepreneurs.…”

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confidence: 99%

Financier Search and Boundaries of the Angel and VC Markets

Pandher

2018

Entrepreneurship Theory and Practice

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This paper studies how critical entrepreneurial finance outcomes such as the investment return and equity division are shaped by venture characteristics, financier risk preferences, and competitive searching. Our analysis uses a double-hazard agency model in which financiers determine the equity division to maximize the expected utility of their investment return while entrepreneurs search for the best deal. Model results provide new theoretical insights on the venture funding cycle, the coexistence of angels/venture capitalists (VCs) with heterogeneous risk aversion, and risk separation in the entrepreneurial finance market. The model predicts that financiers with higher funding capacity and advisory capabilities (e.g., VC firms) will prefer to fund at later stages as their expected investment return rises with the venture’s initial value and financier productivity. Competitive searching by entrepreneurs enables financiers with a diverse set of risk preferences to coexist profitably by reducing the advantage (disadvantage) of lower (higher) risk aversion financiers and making investment returns more similar. Further, the model shows the emergence of a risk separation cutoff beyond which only angels/VCs with lower levels of risk aversion can profitably fund riskier ventures.

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Friends or foes? The interrelationship between angel and venture capital markets

Cited by 137 publications

References 34 publications

Business Angels Research in Entrepreneurial Finance: A Literature Review and a Research Agenda

Business Angels Research in Entrepreneurial Finance: A Literature Review and a Research Agenda

Resource Dependence and Network Relations: A Test of Venture Capital Investment Termination in China

Financier Search and Boundaries of the Angel and VC Markets

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