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...given the complexity and potential litigation risk introduced by angel participation, and the potential difficulty in funding future rounds. Experienced VCs who also participate in managing the firm (=-=Gompers and Lerner 2000-=-, Ch. 8, Hellman and Puri 2002) might also want to prevent angels from free riding on their expertise and efforts, which might further explain why VC-only deals are more successful. 3 We present numer...

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...isaligned incentives. For example, the literature on venture capital financing has documented the use of complex contractual instruments (Gompers 1997; Kaplan and Stromberg 2003), as well as staging (=-=Gompers 1995-=-), as ways to mitigate these problems. However, similar contractual and staging arrangements are believed to be absent from angel deals (Wong 2002). We find that this belief does not properly characte...

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...al litigation risk introduced by angel participation, and the potential difficulty in funding future rounds. Experienced VCs who also participate in managing the firm (Gompers and Lerner 2000, Ch. 8, =-=Hellman and Puri 2002-=-) might also want to prevent angels from free riding on their expertise and efforts, which might further explain why VC-only deals are more successful. 3 We present numerous other new findings regardi...

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...beset by problems of information asymmetry and misaligned incentives. For example, the literature on venture capital financing has documented the use of complex contractual instruments (Gompers 1997; =-=Kaplan and Stromberg 2003-=-), as well as staging (Gompers 1995), as ways to mitigate these problems. However, similar contractual and staging arrangements are believed to be absent from angel deals (Wong 2002). We find that thi...

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...here are several possible explanations for the success of VC-only financed firms in Series A deals. First, based on the popular certification rationale for the superior performance of VC backed IPOs (=-=Megginson and Weiss 1991-=-), one might surmise that the somewhat stronger reputation of VCs involved in VC-only deals relative to those in mixed deals might explain our result. To examine this hypothesis more directly, we exam...

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...der, and particularly those investing in 11We thank Miko?aj Jan Piskorski for sharing centrality measures based on Venture Economics data. Piskorski and Anand (2007) calculate eigenvector centrality (=-=Bonacich 1972-=-) through 1999. We matched the 1999 centrality measures to VC firms in our sample. 12 VC-only deals.12 Because age is likely related to long-term success as well as greater VC experience, it appears t...

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...ate firms are beset by problems of information asymmetry and misaligned incentives. For example, the literature on venture capital financing has documented the use of complex contractual instruments (=-=Gompers 1997-=-; Kaplan and Stromberg 2003), as well as staging (Gompers 1995), as ways to mitigate these problems. However, similar contractual and staging arrangements are believed to be absent from angel deals (W...

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...y investments of individuals (business angels) are believed to represent the lion’s share of investments in de-novo startups.1 Yet, due to the paucity of data on angel financing (Fenn and Liang 1998; =-=Prowse 1998-=-), the nature of angels’ investments in startups has largely been characterized based on survey evidence (Freear, Sohl, and Wetzel 2002). For instance, the conventional wisdom is that angels tend to i...

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...duction Private equity investments of individuals (business angels) are believed to represent the lion’s share of investments in de-novo startups.1 Yet, due to the paucity of data on angel financing (=-=Fenn and Liang 1998-=-; Prowse 1998), the nature of angels’ investments in startups has largely been characterized based on survey evidence (Freear, Sohl, and Wetzel 2002). For instance, the conventional wisdom is that ang...

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...successful. We also find that VCs investing on their own have higher prestige than those co-investing with angels, based on a number of measures including age, size, successful exits, and centrality (=-=Piskorski and Anand 2007-=-). However, VCs participating in Brobeck deals in general are much more prestigious than other VCs found in Venture Economics. Despite some observed prestige differences within our sample, we do not f...

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...preneurs who give away larger stakes of their company while not negotiating as aggressively on deal terms. 15Practitioners classify these terms as investor friendly, entrepreneur friendly or neutral (=-=Wilmerding 2003-=-). 14 procedure. First, in many cases, the documents identified which board seats were to be designated by common shareholders or Series A shareholders. Second, for cases in which seat ownership was n...

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...on (Brobeck). Brobeck had a rich history spanning more than seventy-five years of successful practice and the failure of the giant firm is a signature event in the history of American legal practice (=-=Kostal 2003-=-; Murphy, Dillman, and Johnston 2005). Founded in San Francisco in 1926, Brobeck served corporate clients in California and the western United States. In 1980, the firm opened a satellite office in Pa...

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.... This supports the notion that VCs are more likely to shut down marginally performing firms, perhaps because the opportunity cost of their continuing involvement in such deals is higher than angels (=-=Jovanovic and Szentes 2007-=-). The fact that companies with angel-only Series A deals are equally likely to experience liquidity events in our rather short time frame, despite the younger age of the firms and the greater patienc...

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...in the legal and business press have looked at the specific reasons for the failure. Kostal (2003) is the most readable account, but the perspective of the bankruptcy trustee is also highly relevant (=-=Murphy et al. 2005-=-). 4 conducting social science under the proposed user model. According to the court-approved methodology, access is restricted to archivists and scholars who have signed strict nondisclosure agreemen...