Title

Alumni Networks in Venture Capital Financing

Publication Date

11-15-2021

Abstract

One in three deals in the venture capital market involves an investor and founder from the same alma mater. We show that founders’ connections to early-stage investors through shared education networks are more important than school academic quality or shared geography in facilitating early-stage (VC) funding and outcomes. Venture capitalists tilt their portfolios toward startups from their alma mater and place larger bets on these firms. Connected investments outperform the same investors’ non-connected investments, and our results are stronger where information about founder abilities is likely less clear. Instrumental variables tests exploiting variation in alumni interactions from college football games suggest a causal relationship between alumni connections and funding. Overall, our evidence suggests information benefits from education networks in the market for early-stage funding.

Document Type

Article

Keywords

Alumni networks, SAT scores, Startup financing, PitchBook, Innovation, IPOs, Acquisitions

Disciplines

Finance

DOI

10.2139/ssrn.3970128

Source

SMU Cox: Finance (Topic)

Language

English

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