How does the social capital of venture capitalists (VCs) affect the funding of start-ups? Extant entrepreneurship literature conceptualizes a substitute effect between the social and financial capital that new firms attain from their investors. On the contrary, by building on the rich social capital literature, we hypothesize a positive effect of VCs’ social capital, derived from past syndication, on the amount of money that start-ups receive. Specifically, we argue that both structural aspects of VCs’ social network, such as the number of connections and the spanning of structural holes, and relational aspects, such as the diversity of network partners’ attributes, provide VCs with superior access to information about current investment objects and opportunities to leverage them in the future, increasing their willingness to invest in these firms. Our empirical results, derived from a novel dataset containing more than 5,000 funding rounds in the Internet and IT sector, strongly confirm our hypotheses. Both structural and relational attributes of VCs’ syndication networks have a significant influence on the funds received by start-up firms, highlighting the importance of a social capital perspective on new venture funding. We discuss the implications of our findings for theories of venture capital and entrepreneurship, showing that the role and effect of VCs’ social capital on start-up firms is much more complex than previously argued in the literature.

Additional Metadata
Keywords social capital, social networks, start-ups, structural holes, venture capital
JEL Firm Objectives, Organization, and Behavior (jel L2), Business Administration and Business Economics; Marketing; Accounting (jel M), Business Administration: General (jel M10), Personnel Management (jel M12)
Publisher Erasmus Research Institute of Management
Persistent URL
Series ERIM Report Series Research in Management
Journal ERIM report series research in management Erasmus Research Institute of Management
Alexy, O.T, Block, J.H, Sandner, P.G, & Ter Wal, A.L.J. (2010). The Social Capital of Venture Capitalists and Its Impact on the Funding of Start-Up Firms (No. ERS-2010-028-ORG). ERIM report series research in management Erasmus Research Institute of Management. Erasmus Research Institute of Management. Retrieved from