Research

While developing our new approach to seed-stage funding, we did an enormous amount of research. Here is a collection of resources that we found particularly useful.

Angel Market:

• "Note on Angel Investing". This Tuck School of Business article provides an excellent overview of the role of angels in the startup ecology.
• "Review of Research on the Historical Size of the US Angel Market". This document summarizes the available high-quality research we have found on the historical size of the US angel market.
• Center for Venture Research, Analysis Reports. This academic research group compiles a semi-annual set of statistics on US angel investing.
• Fools Gold: The Truth Behind Angel Investing in America. Pages 32 through 42 of this book by Scott Shane looks at contain an extensive analysis of the available data on the overall market for individual investment in startups.

Angel Returns

• "Review of Research on the Historical Returns of the US Angel Market". This document summarizes the available high-quality research we have found on the historical returns of the US angel market.
• Angel Investor Performance Project (AIPP). This Kauffman Foundation initiative sponsors a variety of angel-related research projects, including the compilation of a publicly available dataset of individual angel investments in the US.
• "Returns to Angel Investors in Groups". This paper from the professors that constructed the AIPP data set calculates the historical return from the included investments..
• "Expected Returns to Angel Investors". This paper from the Federal Reserve uses the AIPP data set to derive the expected returns angel investors used to make investment decisions.
• "Siding with the Angels". This paper from one of the professors that constructed the AIPP data set analyzes angel investments in the UK.
• "Startup Pre-money Valuation: The Keystone to Return on Investment". This article within a Kauffman Foundation publication entitled "Valuing Pre-revenue Companies" summarizes the outcomes from a sample of 117 angel investments.

Seed Capital Market

• "The Seed Capital Flight". This TechJournal South article discusses how Venture Capitalists are a poor source of true seed-stage capital.
• "Seed Capital Gap Growing as Angel Investors Shift Focus". This Center for Venture Research article discusses how angels are investing a decreasing fraction of their money in true seed-stage startups.

Startups and the Economy

• "Jobs Created from Business Startups in the United States". This Census Bureau report shows that US job growth would be negative without new startups.
• "The Economic Future Just Happened". This Kauffman Foundation report shows that job creation by startups is less sensitive to economic downturns than the rest of the economy.
• "Kauffman Index of Entrepreneurial Activity 1996-2007". This report shows the percentage of the population that starts a new business each month.
• "National Entrepreneurship Assessment United States of America". This paper analyzes data from the GEM survey to develop a picture of entrepreneurial activity in the US.
• "Business Creation in the United States: Panel Study of Entrepreneurial Dynamics II Initial Assessment". This book analyzes data from the PSED I and II data sets to create a model for the process by which people start new ventures.

Randomness and Prediction

• The Black Swan. This book by Nassim Taleb explains how it is extremely difficult to predict individual outcomes in a complex, uncertain domain.
• "Comparative Efficiency of Informal and Formal Prediction Procedures". This paper reviews the clear evidence that expert judgment has much less predictive power than even simple structured algorithms.
• "The Validity and Utility of Selection Methods in Personnel Psychology: Practical and Theoretical Implications of 85 Years of Research Findings". This paper reviews characteristics that predict job performance, revealing that unstructured interviews have little marginal benefit.