Analyzing VC influence on startup success : a people-centric network theory approach

Abstract

In this thesis, we study the impact of venture capitalists on startup success using social network analysis. Using multiple sources, we compile a unique dataset of 3199 US-based technology startups and their board members, from which we generate and analyze the interlocking directorates network (formal network) and Twitter network (informal network). We find that startups with more VC board members are more central in the formal network, receive greater funding, have greater annual sales, yet a smaller return-on-investment. We also find that VCs are more central in the Twitter network than non-VCs, have greater Twitter popularity, yet tweet significantly less. Our results indicate that VCs carry a considerable amount of financial and social capital, which they transmit to the startups they invest in, yet their participation leads to lower startup ROI. Additionally, our dataset enabled us to investigate more general questions regarding startup success, including gender diversity on startup boards..