Scaling Up Firms in Entrepreneurial Ecosystems: Fintech and Lawtech Ecosystems Compared

Abstract

What factors drive the scaling up of firms in entrepreneurial ecosystems? We address this question by investigating whether startup founders’ within-ecosystem social ties explain firms’ relative success. We develop a novel database of startup companies and their founders in two markets (fintech and lawtech) and three locations (London, New York City, and San Francisco Bay Area), resulting in six ecosystems. We find that ecosystems with denser social ties experience faster growth and earlier timing for external funding. Within each ecosystem, startup founders with denser social ties achieve faster growth and earlier external funding. Thus, social ties are key metrics indicative of social capital, that can be captured at the ecosystem and individual levels. We suggest different ways in which these metrics can be computed and may be applied in a robust manner to all startups and ecosystems, with utility for entrepreneurs, investors, and policy makers.