Attracting Early-Stage Investors: Evidence from a Randomized Field Experiment

This paper uses a randomized field experiment to identify which start-up characteristics are most important to investors in early-stage firms. The experiment randomizes investors' information sets of fund-raising start-ups. The average investor responds strongly to information about the founding team, but not to firm traction or existing lead investors. We provide evidence that the team is not merely a signal of quality, and that investing based on team information is a rational strategy. Together, our results indicate that information about human assets is causally important for the funding of early-stage firms and hence for entrepreneurial success.