Insufficient access to capital is believed to be one of the major factors that restrains growth and development of young and innovative firms. These firms are less likely to obtain traditional means of finance and thus rely more on other sources of capital, like support from family and friends, informal and formal venture capital.

Many empirical studies have emphasized the importance of institutional venture capital for enabling high growth entrepreneurship and innovation. Yet, there are reasons to believe that provision of informal venture capital will have as significant, if not more significant effect on entrepreneurship. In this paper, we study the relationship between the level of informal venture capital invested and the level of ambitious entrepreneurship in a country, defined as firms that have intentions to grow in terms of employment, internationalize and innovate. We further distinguish between whether or not the capital is provided through an existing relationship, and whether or not the investor has relevant human capital.