Ready or Not? The Sequence of Nascent Entrepreneurs' Actions and External Financing

Abstract

The set of actions undertaken by nascent entrepreneurs during an organization’s emergence is the basis for studying a wide variety of entrepreneurial phenomena, including outcomes such as organizational growth and survival. The act of acquiring external financing is a critical step toward achieving these outcomes, hence this then begs the question, “What actions do nascent entrepreneurs take in order to attain external funding?” In this study we apply an event history model and a framework integrating four major perspectives of entrepreneurship to examine when nascent entrepreneurs acquire external funding during the startup process. We apply this model to nationally representative panel data of nascent entrepreneurs to determine which discrete startup activities are likely to precede external financing. Nascent entrepreneurs tend to take actions that are “resource-light” early in the startup process to build their organizations to a fundable stage before completing more “resource-heavy” activities. However, we provide compelling evidence that some complete resource-heavy actions early and in anticipation of external financing rather than relying on actual use of such funds. Our findings highlight the possibilities of clarifying some of the heterogeneity of entrepreneurial actions to provide a more systematic understanding of organizational emergence and early stage financing.