Financing Biomedical Ventures - Myths and Realities

Angel funding is an important source of capital for startup ventures (J. Sohl 2019), providing a similar level of capital as institutional venture capital (OECD 2011). But angel funding is challenging to study due to the informal nature of the activity. A common paradigm for new venture funding argues that new ventures initially fund their activities with angel investment and then, as they show success, make progress to commercialization and de-risk core venture propositions, ventures transition to more professional institutional (venture capital) funding. A belief in this paradigm can strongly influence early venture creation activities, and assumptions about the later availability of capital from institutional venture capital underpin many startup business plans. However, the literature exploring this phenomenon is very sparse, and the question of the relationship of angel to venture funding transition has rarely been studied. By analyzing a large and robust dataset, this thesis advances the understanding of the actual behavior of investors and the impact this early behavior, and the funding choices involved, have on company outcomes. This thesis also explores a novel form of venture investing and places it into a broader context of new venture funding that may help explain some of the key observations discussed. These fundamentally empirical studies examine the nature/reality of important entrepreneurial phenomena of interactions between angel and venture funding in novel ways, pose questions, and identify a set results that point to a potential market failure. Attempts are made to understand these results and place them into the contexts of both research theory and a broader understanding of entrepreneurial behavior; there certainly remain a set of unanswered questions and potential fruitful directions for future research.