A comparison of the effect of angels and venture capitalists on innovation and value creation

Abstract

We examine the extent to which private equity investors generate value-added benefits to venture development and investigate whether these benefits differ across angel groups and venture capitalists. This is the first study to compare the relative contributions to venture innovation and successful exits by angel groups versus venture capitalists. We do so by tracking external investments in 350 technology ventures. The results suggest that VCs and angel groups contribute equally to innovation rates, but these effects are non-additive. We also show, however, that VC-backed ventures have more impactful innovations and experience faster commercialization rates.