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

Journal Paper by Yannis Pierrakis and Robyn Owen
Innovation | March 2022

Summary

This paper investigates 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, the study finds 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, the 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 the study also suggest that some aspects of human capital signals do not contribute to the entrepreneur’s success in receiving accelerator funding.

The authors’ findings have important repercussions for the quality of design and operation of both private and state supported programmes and accelerator managers.

Further Reading