The early development of new ventures with IT-focused founders

Abstract

Some of today's most prominent organizations were founded by individuals with a strong IT background; a group of people often subject to stereotypes that significantly deviate from the hip and extroverted entrepreneurs' image and, thus, failed to gain attention in extant research so far. Consequently, this study investigates the development of new ventures founded by individuals with an IT background over time. We apply a novel machine learning approach to identify functional-related job positions using data obtained from LinkedIn and track the development of 333 ventures over six years on a monthly basis. Our empirical results show that ventures founded by individuals with an IT background tend to create more IT-related positions in their organizations and have a higher likelihood of receiving first-round VC funding, while we find no significant effect for the second round. The share of IT-related positions has an inverted U-shape effect on the likelihood of receiving first-round VC funding and a negative effect regarding the second round. Our findings highlight the need to invest in non-product related organizational functions for entrepreneurs with an IT background. Avenues for future research include extending the observation period beyond six years and using other operationalizations of IT-related positions.