Abstract

Apart from benefiting from receiving money, start-ups in receipt of venture capital (VC) are assumed to perform better because the VC firms carefully select the target firms and provide added value by monitoring and coaching. The magnitude of those effects depends inter alia on the social capital associated with the deal. Our study focuses on which configurations of structural and relational aspects of social capital associated with an investment deal explain the success of an investment. We apply a fuzzy-set qualitative comparative analysis to our longitudinal sample of 333 VC-backed investments in start-ups in 2006 and 2007 and observe their performance in 2013. Our results show that there are in fact four configurations explaining high performing deals. In each of these configurations, syndicates are a necessary ingredient of success, whereas the importance of status, strength of ties, and the diversity of the VC firms vary. Moreover, our results suggest that who you are and who you know is important, and not only in the periods before a deal, as social capital acquired in the period following a deal is evidently part of the recipe for success as well.

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