Startup ventures and equity finance: How do Business Accelerators and Business Angels’ assess the human capital of socio-environmental mission led entrepreneurs?

ABSTRACT

We investigate the role of entrepreneurs’ human capital on the potential of newly created ventures to receive equity funding from Accelerators and Business Angels using a resource-based approach to entrepreneurship theory. Using data from 10,563 for-profit innovative ventures, we find significant differences between those two groups. More specifically, formal education and founding experience of the entrepreneurial team is positively associated with the likelihood of the team to receive equity from Angels but negatively associated with the likelihood of the team to receive equity from Accelerators. Overall, our results are in line with the theoretical argument that human capital signals are important in reducing the information asymmetries faced by angels and ultimately driving entrepreneurs’ success in securing angel funding, but our results also suggest that some aspects of human capital signals do not contribute to the entrepreneur’s success in receiving accelerator funding. Our findings have important repercussions for the quality of design and operation of both private and state supported programmes and accelerator managers.

KEYWORDS:

• Start-up ventures
• business angels
• business accelerators
• entrepreneurial finance
• equity investment
• human capital

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. Part of the Global Accelerator Learning Initiative (GALI).co-created by Emory University, the U.S. Global Development Lab at the U.S. Agency for International Development, Omidyar Network, The Lemelson Foundation and the Argidius Foundation, the Kauffman Foundation, Stichting DOEN and Banamex.

2. Note that some organisations run multiple accelerator programs.

3. The median size of BA investments is $70,000 and the mean $265,000.