Alumni Networks in Venture Capital Financing

Authors

Jon A. Garfinkel, University of Iowa - Tippie College of BusinessFollow
Erik J. Mayer, Southern Methodist University (SMU) - Finance DepartmentFollow
Ilya A. Strebulaev, Stanford University - Graduate School of Business; National Bureau of Economic ResearchFollow
Emmanuel Yimfor, University of Michigan, Stephen M. Ross School of BusinessFollow

Publication Date

11-24-2021

Abstract

One in three deals in the venture capital market involves an investor and founder from the same alma mater. We show these connections facilitate VC funding and improve outcomes. Venture capitalists tilt their portfolios toward startups from their alma mater and place larger bets on these firms. Results are stronger when information about founder abilities is less clear, and connected investments outperform the same investors’ unconnected investments. Tests exploiting alumni interactions from college football games and VC-partner turnover suggest a causal relationship between connections and funding. Overall, our evidence suggests information benefits from education networks in the venture capital market.

Document Type

Article

Keywords

Alumni Networks, Startup Financing, Innovation, IPO, Acquisition, SAT Score, PitchBook

Disciplines

Finance

DOI

10.2139/ssrn.3970128

Source

SMU Cox: Finance (Topic)

Language

English