'Deal-makers': Reputation attracts quality

This study is a preliminary step in examining whether reputation effects are operating in the UK informal venture capital market. We test the notion as to whether deal-makers rely on fundamentally different sources of leads and get shown better quality opportunities generally than is the case for less active investors. By deal-makers, we mean individuals who have: 1) a demonstrated track record of completing deals, 2) significant personal resources to invest in new opportunities presented to them, and 3) have substantial previous experience in the building of new ventures. Our findings reveal differences in terms of the relative reliance on different sources of investment leads and the perceived quality of specific sources. Over time, it appears that the most active segment of the market rely less on 'public' as opposed to 'private' sources for leads and benefit from an extensive base of contacts developed as a result of building their own portfolios, particularly among individual investors, venture capital funds and entrepreneurs.