Alumni Networks in Venture Capital Financing
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.
Alumni Networks, Startup Financing, Innovation, IPO, Acquisition, SAT Score, PitchBook
SMU Cox: Finance (Topic)