Early-stage Ventures Research Articles

The Gender of Money: How Gender Structures the Market for Entrepreneurial Capital

The search for answers to the chronic underrepresentation of women among funded entrepreneurs has highlighted the influence of entrepreneur gender on financing outcomes. Yet it is important to also consider the demographic makeup of the investor population. Using data on 652 businesses presented to 40 investors on the televised pitch competition series Shark Tank, I examine how investor gender impacts not only who receives an offer, but on what terms, and how that may shape the structure of the market for early-stage venture financing. Exploiting unique features of my setting to overcome the empirical challenges that normally hamper the investigation of gender effects on investor behavior, I find that both male and female investors are more likely to extend offers to entrepreneurs of the same gender. I also find that female investors offer terms more favorable to entrepreneurs, in an apparent attempt to attract more desirable investment opportunities, and that female entrepreneurs appear more responsive to this strategy. These factors combine to increase the likelihood that female founders will be funded by female investors, leading to gender segregation in the market for capital. Implications of the effect of numerical representation of women among investors are discussed.

Monetizing new music ventures through blockchain: Four possible futures?

The article examines the rapidly developing area of blockchain finance as a potential opportunity for new creative ventures to obtain external investment funding and generate revenues. We focus on the music industry, as an example of how alternative Internet-based finance utilizing blockchain could provide opportunities for start-up funding and ongoing revenue streams. Our pioneering pilot research findings are drawn from literature review and emerging case studies, and are grounded in the academic literature of start-up funding gaps. Although some expect blockchain technology to remove intermediaries, facilitating a direct relationship between artist and fan, initial findings are that intermediation in some form will remain. The article’s central focus is the crucial emerging role of these facilitator organizations – the new breed of financial intermediaries or ‘infomediaries’. We examine this evolving process through adoption and development of financial intermediation theory, exploring the wider financial intermediary concept of incubators and accelerators as expert investors and promoters of new and very early-stage ventures – including artists. The article poses the question of whether blockchain technology offers a new, more cooperative approach for creative ventures, or merely the reinvention of existing corporate structures, for instance, the three major record labels that currently dominate recorded music. The article identifies four possible paths for the adoption of blockchain technology within the music industry, ranging from the anarcho-libertarian to the corporate and from the ‘utopian’ to the ‘dystopian’.

Balancing financial, social and environmental values: can new ventures make an impact without sacrificing profits

What drives entrepreneurial action to create a lasting impact? The creation of new ventures that aim at having an impact beyond their financial performance face additional challenges: achieving economic sustainability and at the same time addressing social or environmental issues. Little is known on how these new hybrid organisations, aiming for multiple impact dimensions, organise and prioritise for their social, environmental, and financial goals. A dataset of 4,125 early-stage ventures is used to gain insights into how blended values are converted into financial, social and environmental impacts, giving shape to different types of hybrid organisations. Our findings suggest new hybrid organisations might opt to sacrifice financial impact to achieve social impact, yet this is not the case when they aim to generate environmental or sustainable impact. Therefore, the tensions and sacrifices related to holding blended values are not homogeneous across all types of new hybrid organisations.

The evolution of equity crowdfunding: Insights from co-investments of angels and the crowd

Equity crowdfunding platforms are at the center of the digital transformation of early-stage venture funding. These digital platforms were originally heralded as a democratizing force in early stage finance, due to their role in facilitating the exchange between entrepreneurs and a multitude of non-professional small investors (“the crowd”). Equity crowdfunding platforms have experienced considerable growth and now attract professional investors including business angels. The presence of angels alongside the crowd on equity crowdfunding platforms has raised questions whether these digital platforms can continue to play their role in democratizing access to capital. Using data from a leading equity crowdfunding platform, we examine the interplay between the investment decisions of angels and the crowd. We find evidence of information flows in crowdfunding platforms between angels, and from angels to the crowd. We find angels play an important role in funding of large ventures, whereas the crowd not only fill the funding gaps for such large ventures but also play a pivotal role in the funding of small ones. The complementarity between angels and crowd investors seems to increase the overall efficiency in an otherwise highly asymmetric and uncertain market, confirming that digitization can indeed bring important benefits to venture investment.

Determinants of Early-Stage Technology Venture Valuation by Business Angels and Venture Capitalists

The valuation of early-stage ventures represents a difficult and often subjective process and is characterised by risk and uncertainty. This can be further stressed for technology-driven ventures, having substantial technological risks. We therefore approached existing research on the determinants of early-stage technology venture valuation in a structured way through means of a systematic literature review (SLR). Whereas general valuation determinants strongly focus on personality and experience of the founders as well as market potential, technology venture valuation is strongly influenced by the existence and quality of alliances with corporations and investors as well as patents. We consider these determinants as crucial in technology venture valuation to ensure market access, to signal a strong belief in the technology and to provide proof of a high degree of innovation, thereby noticeably reducing technology-specific complexity and uncertainty.

Determinants of early-stage technology venture valuation by business angels and venture capitalists

The valuation of early-stage ventures represents a difficult and often subjective process and is characterised by risk and uncertainty. This can be further stressed for technology-driven ventures, having substantial technological risks. We therefore approached existing research on the determinants of early-stage technology venture valuation in a structured way through means of a systematic literature review (SLR). Whereas general valuation determinants strongly focus on personality and experience of the founders as well as market potential, technology venture valuation is strongly influenced by the existence and quality of alliances with corporations and investors as well as patents. We consider these determinants as crucial in technology venture valuation to ensure market access, to signal a strong belief in the technology and to provide proof of a high degree of innovation, thereby noticeably reducing technology-specific complexity and uncertainty.

Experimentation, Learning, and Appropriability in Early-Stage Ventures

This study examines the tension between learning and appropriability in the experimentation process of early-stage ventures. I argue that when formal intellectual property is weak, the learning benefits of experimentation may be offset by its imitation risks. I test this argument on a hand-collected dataset of 1,203 US-based software ventures, exploiting the software release life cycle terminology to measure experimentation and the 2014 US Supreme Court decision Alice Corp. v. CLS Bank International as a negative shock to patent protection. Following this ruling, the affected ventures are less likely to engage in experimentation. This relationship is stronger for ventures facing low uncertainty or high competition. Overall, the evidence suggests that ventures perceive the tension between learning and appropriability and appear to adjust their strategy accordingly.

Dynamic Capabilities and Entrepreneurial Ecosystems: The Micro-Foundations of Regional Entrepreneurship

In pursuit of the beneficial outcomes of entrepreneurship, governments and regional development organisations enact policies to stimulate entrepreneurial activity. A growing focus of policymakers in emerging and developed economies is the promotion of entrepreneurial ecosystems: the interconnected system of forces that generate and sustain regional entrepreneurship. Despite intense interest in entrepreneurial ecosystems, the topic is under-theorised. Studies draw attention to the positive effects of entrepreneurial ecosystems on the creation and functioning of early-stage ventures; however, the specific mechanisms through which ecosystems influence entrepreneurs are not clear. To address this issue, we build on dynamic capabilities theory to create a theoretical framework that identifies a set of forces through which ecosystems influence entrepreneurship. We propose that in vibrant entrepreneurial ecosystems entrepreneurs are more able to sense, seize and reconfigure resources and opportunities. Our theory contributes to entrepreneurship research, has implications for policymakers and practitioners, and suggests directions for future studies.

Early Stage Venture Strategy and the Survival of Nascent Entrepreneurial Firms: A Sand Cone Model Approach

Early stage firms often face conflicting pressures on where and how to prioritize their efforts. In this paper, we aim to shed light on the benefits of different competitive priorities, using a sand cone model of operations strategy specifically applied to the context of early stage new ventures. In particular, we examine the relationship between strategy and the survival of these nascent entrepreneurial firms using data from the Panel Study of Entrepreneurial Dynamics II. We find that a competitive priority of serving customer needs is associated with a greater probability of survival in nascent ventures. Innovation and traditional marketing activities were not significantly related to survival. The paper concludes with implications for practitioners and future research.

Dimensions of Dependence: An Analysis of Entrepreneurial Ventures Ties to Established Corporations

This study focuses on the antecedents to the formation of ties between privately- held ventures and incumbent corporations. We focus specifically on the role of the resource needs of ventures and how these resource needs affect the relatedness of the CVC investors with whom they choose to partner. Two forms of resource need are thus investigated: operational and social. We find that the need for complementary assets in research and development leads ventures to establish ties to more related CVC investors. This effect is found strongest in early stage ventures. In the later stages, ventures become less driven by operational resources and more by the social context in which they operate. The increased formation of independent ventures in public offerings leads ventures to seek greater legitimacy by forming ties to related CVC investors, all while increased intensity of takeover activities leads ventures to less related CVCs.

Entrepreneurial pivoting as organizational search: Defining pivoting in early stage ventures.

This paper explores the role of pivoting in the performance and growth of early stage entrepreneurial ventures. Despite its wide adoption by practitioners, and its often-quoted association with ent...

Business Accelerators and the Development of Early-Stage Ventures

As the popularity and reach of accelerators and other entrepreneurial support organizations expand, their potential to impact early-stage ventures increases. Yet our understanding of how they opera...

Impression and Symbolic Management at the Intersection of Multiple Levels of Analysis

This symposium is developed around two main organization and management theories: impression management theory and symbolic management theory. Through a comparison of four studies at multiple levels of analysis and a following discussion, the symposium promises to provide the audience with a better understanding of these concepts. In particular, it will be possible to discuss how impression and symbolic management relate to each other at multiple levels of analysis, and to consider implications for future research. Careers Embedded in Multiple Institutional Logics: the Construction of a Professional Image Presenter: Cleo Silvestri; Imperial College London The Face of the Entrepreneur: Visual Impression Management in Early Stage Ventures Presenter: Joao Cotter Salvado; London Business School Do You Get What You Pay For? The Unintended Consequence of Corporate Philanthropy Presenter: Eric Y. Lee; U. of Georgia Presenter: Daniel Gamache; U. of Georgia Social Network Ties and Symbolic Management in Firm leadership and Governance Presenter: James D. Westphal; U. of Michigan Presenter: Sun Hyun Park; Seoul National U.

Recruiting Talent for Early-stage Ventures: an Online Experiment on Startup Job Ads (WITHDRAWN)

Startup’s employees, labeled “joiners”, are an important resource for business success and their recruitment is a critical task. Compared to incumbents, startups have a harder time to recruit emplo...

Evaluation of Early-Stage Ventures: Bias across Different Evaluation Regimes

This paper explores the selection mechanisms inside a startup accelerator program, measuring how variation in institutional arrangements impacts how judges evaluate businesses opportunities. Specifically, we focus on the role of gender and status cues in the evaluation of high uncertainty projects by explicitly comparing the evaluation of a fixed set of projects across two

Evaluation of Early-Stage Ventures: Coherent Combinations of Experimentation, Planning, and Structure

We examine the role of experimentation, planning, and structure in the evaluation of early-stage ventures. We hypothesize that the choice of coherent combinations – experimentation and informal structure or planning and formal structure – is associated with positive evaluations. First, using proprietary data from a venture competition, we find a positive correlation between coherent combinations and evaluations. Next, we verify the causality of this pattern through an experimental study on Amazon Mechanical Turk and find consistent results. Both in the field and the experiment, the effect is driven by evaluators with entrepreneurial experience. Overall, the evidence suggests that evaluators are sensitive to the choices of strategy and structure in early-stage ventures, contrary to the common belief that these features play little role in these organizations.

Gender Bias, Social Impact Framing, and Evaluation of Entrepreneurial Ventures

Recent studies find that female-led ventures are penalized relative to male-led ventures as a result of role incongruity or a perceived “lack of fit” between female stereotypes and expected personal qualities of business entrepreneurs. We examine whether social impact framing that emphasizes a venture’s social–environmental welfare benefits, which research has shown to elicit stereotypically feminine attributions of warmth, diminishes these penalties. We initially investigate this proposition in a field study of evaluations of early-stage ventures and find evidence of lessened gender penalties for female-led ventures that are presented using a social impact frame. In a second study, we experimentally validate this effect and show that it is mediated by the effect of social impact framing on perceptions of the entrepreneur’s warmth. The effect of social impact frames on venture evaluations did not apply to men, was not a result of perceptions of increased competence, and was not conditional on the gender of evaluators. Taken together, our findings demonstrate that social impact framing increases attributions of warmth for all entrepreneurs but with positive consequences on business evaluation only for female-led ventures, for which increased perceptions of warmth attenuate female entrepreneurs’ gender role incongruity. The online appendix is available at https://doi.org/10.1287/orsc.2017.1172 .

A Study on the Effects of Adoption and Application of Platform Strategy for Social Ventures in Early Stage of Start-up: A Case Study of JUMP!

소셜벤처는 기존의 일반적인 벤처기업과 달리 기술, 경영 혁신 등의 방법으로 경영 활동을 수행하는 기업 형태에 사회적 가치를 추구해야 하는 기업 형태를 결합한 조직이다. 소셜벤처는 창업 초기의 전략 수립과 이에 따른 비즈니스 모델 설정이 일반 벤처보다 더 어려울 수밖에 없는데 이는 소셜벤처들이 경제적 가치 추구와 함께 사회적 가치를 동시에 추구해야 하는 소셜벤처만의 이중적인 사업 목적을 가지고 있기 때문이다. 따라서, 소셜벤처만이 가지고 있는 이중적인 사업 목적을 달성하기 위한 새로운 또는 효과적인 사업 전략의 필요성이 대두되고 있으며, 관련 그룹들을 플랫폼에 모아 네트워크 효과를 창출하고 새로운 기업 생태계를 구축하는 플랫폼 전략(Platform Strategy)이 주목된다. 본 논문에서는 국내 소셜벤처 중에 점프!라는 기업의 사례를 통해 이 회사가 2011년 5월에 창업한 이래 현재까지 사업의 내용과 규모를 확장하면서 지속적인 성장을 이루어 낼 수 있었던 것은 창업 초기에 플랫폼 전략을 도입하고, 플랫폼 전략의 성공을 위한 4가지 핵심요인인 핵심역량 보유, 가치창출능력, 효율성, 네트워크효과를 통해서 다양한 참여자 그룹이 플랫폼 안에서 새로운 혁신과 성장을 만들었기 때문이다. 본 논문은 소셜벤처에 있어서 창업 초기부터 플랫폼 전략을 도입하여 성공적으로 적용하는 것이 소셜벤처의 지속가능한 성장에 어떤 유의미한 효과를 발생시키는지를 사례를 통해 알아보고 실무적 유용성과 학문적 시사점을 제시하고자 한다.

To Bond or to Bridge: Is There an Optimal Network Position for Early- Stage Ventures?

We use social capital theory to explain the impact of network structures based on direct and indirect ties on the success of early- stage ventures across the phases of a venture’s life cycle. Using a sample of 7,135 ventures and 26,693 extended top management team members–including founders, management team, and advisors–, we show that bonding and bridging structures exclusively based on weak ties both contribute positively to the success of early-stage ventures. We also find support for firm age as a critical moderator of the effects of bonding and bridging structures, which is due to the unique resource demands and managerial challenges during the early phases of venture growth.

Accelerators: An Assessment of Acceleration Models

Accelerators assist early-stage ventures by offering networking opportunities, access to funding and training. We map business accelerators in five categories: Independent Accelerators (IA), Corpor...