Angel Financing and the Performance of High-Tech Start-Ups

In this paper, we investigate what drives the performance of high-tech start-ups receiving angel financing, while taking a closer look at the capabilities (i.e., experience) and investment behavior of business angels (BAs). We exploit a new data set (extracted from Crunchbase), which consists of 1,933 high-tech start-ups that received at least one financing round from a BA. The results indicate that the experience of BAs in early stage investments is positively associated with additional receipt of follow-on rounds of financing and sequential capital injections from venture capitalists (VCs). Later-stage experience is positively associated with the start-up's success (i.e., probability to be listed or acquired), but reduces the need for new VCs to invest in the start-up. Furthermore, we find consistent evidence that start-ups that combine BA and VC financing experience higher levels of funding amounts, additional VC financing, and an improved likelihood of success. Finally, we find that the co-localization of BA investors and start-ups in the same area facilitates the attraction of VC financing.