Early Individual Stakeholders, First Venture Capital Investment, and Exit in the UK Startup Ecosystem


This paper analyzes the effects of the individual stakeholders in the early stages of a startup on the perfomance and eventual success of the startup. We show first how the "quantity" and "quality" of founders, directors and individual investors affect the first VC investment, in terms of the type, quantity and quality of the first VC investors. Subsequently, we show that the characteristics of the early stakeholders also affect eventual startup exit and success, both directly as well as indirectly, through the first VC investment. Thus some of the effects that may have been attributed to VC investors should in fact be attributed to the individual stakeholders. As a result, one may draw wrong conclusions about the effects of first VC investment if the pre-institutional features are not included in the analysis.