Argentum, in cooperation with NHH and SIFR, will arrange the Argentum Conference and Symposium in Stockholm this September. One of the objectives is to highlight the latest in private equity research. Leading up to the conference, we will present an introduction to each of the papers that will be presented each week.

Antoinette Schoar (MIT): The Consequences of Entrepreneurial Finance: A Regression Discontinuity Analysis

Co-authors: William R. Kerr and Josh Lerner

This paper documents the role of angel funding for the growth, survival and access to follow-on funding of high-growth start-up firms. The paper shows that angel funding is positively correlated with higher survival, additional fundraising and faster growth. The results suggest that angel investors have a large and significant impact on the success and survival of start-up ventures.

One of the central questions in the entrepreneurial finance literature is to which extent early stage financiers such as angels and venture funds have a real impact on the firms they invest in. In theory, such financing should lead to improved governance and operations, lower capital constraints and stronger firm growth. But the emopirical documentation of this has been challenging.

This paper focuses on a neglected segment of entrepreneurial finance: angel investments. This study compare firms that fall just above an just below the criteria for funding from the angel group. The idea is that firms that fall just around the cut-off level have similar characteristics that make it possible to estimate the causal effect of angel financing.

The paper looks at the impact of angel funding on performance and access to follow-on financing. The authors find that funded firms are more likely to survive for at least four years and to raise additional financing outside the angel group. They are also more likely to show improved venture performance and growth and the improvement gains range between 30 and 50 percent.

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