The angels and the crowd: business angels’ investment practices and follow-on crowdfunding in entrepreneurial firms

Abstract This study sheds light on the fundraising strategies employed by entrepreneurial firms over time, focusing on a still under-investigated phenomenon: the use of follow-on equity crowdfunding (ECF) by angel-backed companies. Drawing on an original dataset of Italian companies that received business angels’ (BAs) support between 2008 and 2018, this study implements an event history analysis to identify key BAs’ investment practices related to their backed companies’ likelihood of securing a follow-on ECF round. Our results show that BAs’ investment practices (selectivity and affiliation with an angel network) are positively related to the probability of securing a follow-on ECF round due to their value-added and signaling functions. These findings advance our understanding of the interactions among alternative financing sources in the growth phases of entrepreneurial firms, emphasizing the pivotal role played by certain BAs’ investment practices.