Alumni Networks in Venture Capital Financing

Authors

Jon A. Garfinkel, University of Iowa - Tippie College of BusinessFollow
Erik J. Mayer, University of Wisconsin-Madison, Finance DepartmentFollow
Ilya A. Strebulaev, Stanford University - Graduate School of Business; National Bureau of Economic ResearchFollow
Emmanuel Yimfor, Columbia Business SchoolFollow

Publication Date

11-24-2021

Abstract

One-third of startup deals involve a founder and investor from the same university. Venture capitalists are more likely to invest in, and place larger bets on, alumni from their alma mater. These deals are more likely to IPO, post-funding. Using VC partner turnover, we show a causal link between education ties and funding likelihood. Marginal startups, identified using the supply of funding as an instrument, have better post-funding outcomes when the founder and VC share an alma mater. Our results imply that university connections facilitate information flow rather than diverting funds towards lower-quality startups.

Document Type

Article

Keywords

Alumni Networks, Startup Financing, Innovation, IPO, Acquisition

Disciplines

Finance

DOI

10.2139/ssrn.3970128

Source

SMU Cox: Finance (Topic)

Language

English