Entrepreneurial Finance Research Articles

The effects of promotional narratives in entrepreneurial financing: Evidence from pre-sale crowdfunding

The effects of promotional narratives in entrepreneurial financing: Evidence from pre-sale crowdfunding

Financing green innovation startups: a systematic literature review on early-stage SME funding

ABSTRACT This paper investigates the critical issue of financing early-stage green startups, examining the types of investors and finance models available, the challenges these startups face, and how the green finance ecosystem can better support early-stage investment. Utilizing a systematic literature review (SLR) methodology, we provide a comprehensive analysis of the current landscape. Our findings reveal a significant paucity of data and a bias towards well-established North American and European ecosystems, while highlighting an emerging diversity in private finance sources post-Global financial crisis (GFC), including grants, equity, and crowdfunding. Despite this, there remains a heavy reliance on public funding and a lack of evidence regarding its impact. The inherent characteristics of cleantech – high capital expenditure, long investment horizons, and disruptive nature – necessitate innovative public financing instruments and policies to reduce risk and attract private investment. Our theoretical contribution highlights the necessity for interdisciplinary research and policy collaboration to develop a holistic entrepreneurial finance (entfin) ecosystem. This approach should integrate quantitative economic and qualitative behavioural finance research to address information asymmetries and improve the green economy policy mix. Such a framework will support public-private co-financing, enhance stakeholder engagement, and provide evidence for policy decisions, facilitating more rapid commercialization of cleantech innovations for environmental sustainability.

Investing in people, not in products: how age, gender, ethnicity, and attractiveness of entrepreneurial teams influence the decision-making of angel investors in Germany

AbstractThe high-risk decision environment and information asymmetries associated with investing in early-stage startups in pitch competitions make angel investors prone to biased decision-making. Drawing from social perception theory, this study examines how angel investors’ decisions are influenced by observed personal characteristics of entrepreneurial teams, based on representative stereotypes. Analyzing a dataset of N = 553 startup pitches from the German televised competition Die Höhle der Löwen, this study reveals that the likelihood of securing deals with German angel investors and the resulting business valuations are linked to certain superficial team characteristics. Specifically, the age, diverse ethnicity, and physical attractiveness of the entrepreneurial team have a significant positive effect on deal probabilities. Moreover, angel investors offer lower deal valuations to teams of older and female entrepreneurs, suggesting the presence of a systematic bias. These insights contribute to understanding the role of stereotypes in entrepreneurial finance and address the challenges related to bias in access to capital for early-stage startups in Germany.

Unlocking Organizational Innovativeness: Exploring the Role of Entrepreneurial Orientation and Financing in an Emerging Economy

Organizations and small startups play a significant role in improving the economic progress of newly industrialized countries. Their contribution to economic growth depends mainly on their innovativeness. Based on the resource-based view theory, this study seeks to understand how these enterprises use internal and external resources to uncover opportunities for innovative practices. Specifically, we examine entrepreneurial orientation (innovativeness, autonomy, risk-taking, competitive aggressiveness and proactiveness) and external financing for ventures. Through a comprehensive survey encompassing 200 ventures in Pakistan, this study reveals the significant impact of three dimensions of entrepreneurial orientation (innovativeness, risk-taking, and competitive aggressiveness) and entrepreneurial finance on organizational innovativeness. This finding is important because it contributes to the growing body of literature on entrepreneurial finance and shows how financing influences innovativeness in startups, thus advancing knowledge within this field. Although the study uses a small sample, it serves as a launch pad for further studies to explore different forms of capital and their unique effects on organizational innovativeness

Gender disparities among financial entrepreneurs: The case of hedge funds

ABSTRACT Hedge funds (HFs) operate as small and medium-sized enterprises and are managed by entrepreneurs. When it comes to gender, the HF industry is among the most unequal sectors. International associations tried to reduce this gap by creating entrepreneurial ecosystems tailored to women in finance. Such initiatives are ineffective if quality is not present. The market is quick to assess who will survive and who will not. If there is a gender gap, we must first assess whether it comes from differences in performance. Our results indicate that this is not the case, at least for equity HFs with global investment focus. Sociocultural factors are more likely the reason. Our findings should encourage women in finance to break sociocultural barriers and take on leadership responsibilities. Efforts should focus on encouraging women to join the finance industry at the earliest career stages. Efficient capital markets will then select the best managers, regardless of their gender.

Barriers to creating value with cognitive accessibility features in digital services

AbstractDigital services should be designed so that as many people as possible can use them. Designing digital services to be cognitively accessible brings value to the user if the user can use the digital service and understands its content. The benefits of cognitive accessibility, e.g., better customer experience or better usability in digital services, have been studied from the perspective of both users and organisations. Despite the benefits, there can be barriers to designing and implementing usable and understandable digital services. This paper aims to identify service providers’ perceptions of barriers to designing cognitively accessible digital services. When the barriers are understood, entrepreneurs can be supported to design digital services that generate value for customers. To better understand the barriers, qualitative research with semi-structured in-depth interviews was conducted with Finnish entrepreneurs. The results revealed different kinds of barriers to designing and implementing cognitively accessible digital services.

Do the Characteristics of Startup Founders Matter for Funding Performance?

Introduction/Main Objectives: Based on the upper echelons theory, this research examines the role of startup founders' characteristics on startup funding performance (SFP). This study considers the founder's experience, education, and gender as the characteristics that positively affect the SFP. Background Problems: While academia and industry emphasize the importance of startup funding performance (SFP), the empirical evidence on its determinant has received less attention. Yet, upper echelons theory addresses the importance of a leader's characteristics in increasing the organization's performance. Therefore, the current study focuses on investigating the role of startup founders' characteristics in the SFP. Novelty: The current study proposes the founder's characteristics as the key factor for startup funding. Unlike previous studies, this study utilized a survey design to answer the research question. Additionally, this study is the pioneer for entrepreneurial finance studies in gauging the upper-echelons framework. Research Methods: This research collected information from 228 Indonesian Startups through a survey. The estimation model is estimated using robust cross-sectional OLS regression and logistic regression. For robustness purposes, this study tackles the endogeneity issue by using two-stage least squares (TSLS) and PLS-SEM. Finding/Results: The regression results (including the two-stage least square approach) reveal that education and gender play a significant role in SFP but not experience. Moreover, it shows that higher education would increase a startup's probability of having better funding. Meanwhile, male entrepreneurs have lower funding performance than women entrepreneurs. Conclusion: Our study surmises that the education of the founders is crucial for startup financing in Indonesia. It also shows that the experience of founders has a trivial effect. It supports the upper echelons theory, emphasizing the pivotal role of founders' characteristics in entrepreneurial finance. Policy-wise, focusing on education can enhance startup success while addressing gender disparities is crucial. However, limitations exist, suggesting the need for longitudinal studies and broader sample sizes. Future research could explore managerial abilities and cultural factors, offering fresh insights into the literature.

(De)centralized governance and the value of platform-based new ventures: The moderating role of teams and transparency

AbstractDrawing on institutional and demand-side perspectives, we investigate performance implications of (de)centralized governance modes in platform-based new ventures, and the conditions under which (de)centralization generates more value. Using a sample of 1,431 Initial Coin Offerings (ICOs), a new source of entrepreneurial finance, we find that centralization of decision-making is positively associated with platforms’ market value. Further, we consider how platform characteristics affect this relationship, finding that both the presence of an experienced Chief Technology Officer (CTO) and project transparency negatively moderate the positive relationship between centralization and market value. Thus, decentralized platforms need leaders with technical experience and project transparency to generate more value. Overall, this study provides a better understanding of the boundary conditions that increase the value of (de)centralized governance.

The Role of Entrepreneurial Finance in Fueling Growth and Innovation

The Role of Entrepreneurial Finance in Fueling Growth and Innovation

Fintech Revolution: Empowering Entrepreneurial Intentions through Crowdfunding, Cryptocurrency, Blockchain, Mobile Payments, and Artificial Intelligence

PURPOSE – Financial technology, also known as “FinTech,” has evolved to disrupt nearly every aspect of traditional financial services and it has become increasingly important in the world’s economic system. The main purpose of the study is to explore the relationship between Financial Technology (Fintech) and Entrepreneurial Intentions. It focuses on the impact of specific Fintech innovations such as Crowdfunding, Mobile Payments, Blockchain, Cryptocurrency, and Artificial Intelligence (AI), on Entrepreneurial Finance. The study examines how these Fintech advancements have affected the overall entrepreneurial ecosystem, fostering innovation, supporting startups, and driving economic growth. Using mixed-methods, the research combines qualitative interviews and quantitative surveys to reveal key factors that have completely shaped the entrepreneurial ecosystem in the context of fintech. EXECUTIVE SUMMARY – Financial technology revolution unleashing a wave of technological innovations has transformed the entrepreneurial landscape. Crowdfunding, cryptocurrency, blockchain, mobile payments, and artificial intelligence (AI) play key roles in empowering aspiring entrepreneurs, fueling financial inclusion, and driving economic growth. This report examines the impact of these fintech advancements on entrepreneurial intentions, exploring their benefits, challenges, and future prospects.

Exploring the Signaling Effect of B Corp Certification in Entrepreneurial Finance

Exploring the Signaling Effect of B Corp Certification in Entrepreneurial Finance

New Trends in Entrepreneurial Finance Research

New Trends in Entrepreneurial Finance Research

Are SPACs a good investment deal for investors? A performance comparison between SPACs vs IPOs

PurposeSPACs are reshaping the world of digital entrepreneurial finance. Firms in the digital sector often need access to public markets for long-term competitiveness. SPACs offer a viable solution for these entities to collect capital and transition to public ownership quicker than IPOs. In this context, the paper aims to analyse and compare the performance of SPACs with those of IPOs in the post-business combination phase. The objective is to provide novel insights into the determinants of SPAC operating and market performance by considering firm-specific and deal-specific characteristics and the broader implications of market uncertainty.Design/methodology/approachThe analysis applies univariate and multivariate OLS regressions to a sample of 96 SPACs to investigate the drivers affecting SPACs' performance vis-a-vis IPOs.FindingsThe study finds that SPACs underperform the matched group of IPOs on both operating and stock market performance (buy-and-hold strategy). The time to execute a business combination negatively correlates with SPAC performance, and proximity to the 80% deal threshold negatively affects share price performance and EBITDA margin.Practical implicationsThe objective is to offer insights for institutional investors to effectively select prime targets within the SPAC framework.Originality/valueThis study strengthens the findings related to the drivers influencing the long-term performance of SPACs that were previously identified in prior research.

Is “Open” ready for investment? A venture capitalist’s dilemma

Learning outcomes Upon completion of the case study, student will be able to discuss valuation of new-age ventures and understand how it is different from the valuation of organisations with a longer history; analyse the considerations (quantitative and qualitative) while evaluating investments in new-age ventures; and develop a framework involving the various dimensions of investment readiness. Case overview/synopsis The fintech space in India has seen an upsurge of activities since 2016. The growth of Paytm, RazorPay and many such ventures and the drastic improvements in this ecosystem have been significant catalysts for this segment of new-age tech companies. Funding and valuations have seen a sharp increase, especially when businesses worldwide felt the after-effects of the pandemic, with India being home to a large number of unicorns, second only to the USA. Open Financial Technologies Ltd (OPEN TECH) is one such venture that claimed its spot as the 100th unicorn of India within a span of five years since inception. With a strong focus on disrupting the banking sector in India, this neo-bank aspires to be the equivalent of Stripe in India and eventually be a strong competitor in the international market. Richard O’Neil is an active investor in the fintech space, based out of the UK, and he is currently looking to expand the market by considering investment options. In the process, Richard and his team have identified India as a viable and competitive market, as new venture support and funding are increasingly emphasized through policies such as Startup India, Make in India and many such more to sustain and propel its benefits. As the team was exploring ventures worth investing, Open Financial Technologies caught their attention. However, Richard, given his experience across fields and being a seasoned private equity investor, realised that valuing new-age companies is as much an art as it is a science. Multiple quantitative and qualitative aspects need to be considered while relevance of traditional valuation techniques to put a value on such entrepreneurial ventures is questioned. At this juncture, he finds it crucial to evaluate the investment readiness of OPEN TECH. This case allows students to understand how valuation of new ventures is different from that of established companies and analyse the crucial factors worth considering while evaluating an investment proposal as a venture capitalist, which eventually helps shape the funding pitch of an entrepreneur in the space. Complexity academic level This case study can be useful for students undertaking graduate- and executive-level courses on business valuation and strategy and entrepreneurship, as well as entrepreneurial finance elective at the undergraduate level. One could use this case in courses on entrepreneurship and innovation, such as an introductory course on entrepreneurial finance and a course on venture capital and private equity. It also allows discussion on fintech and neobanking and the valuation of privately held companies. Supplementary materials Teaching notes are available for educators only. Subject code CSS 1: Accounting and finance.

Engaging with startups through corporate accelerators: the case of H‐FARM's White Label Accelerator

Corporate accelerators have emerged in recent years as an innovation mechanism that builds bridges between corporations and startups. Through inbound Open Innovation (OI) activities, established firms open their innovation processes to startups to acquire their knowledge. Previous research has focused either on independent accelerators or on corporate accelerator programs that an established firm operates internally. The literature on how accelerators orchestrate different OI practices is sparse, yet large corporations are forging ahead with corporate accelerators. Furthermore, new corporate accelerator models have emerged, rendering the corporate accelerator phenomenon more heterogenous. In this paper, adopting an OI lens, we explore the White Label Accelerator (WLA), a recent model in which an independent accelerator manages the program on behalf of a single corporate organization. Through an in‐depth case study of Technogym Wellness Accelerator, a pioneer and most important WLA in Italy set up by H‐Farm on behalf of Technogym, a large fitness and wellness company, we investigate how such accelerators function as an OI tool. We found four key dimensions that enable successful outcomes. In particular, the importance of entrepreneurial alertness as a key driver for the effective exploitation of intellectual property represents a significant finding. Our research contributes to OI and entrepreneurial finance literature and provides insightful managerial implications to corporate accelerator stakeholders and startups' managers.

Investigating Financial Resource Sufficiency for Entrepreneurial Growth: A Case of SMEs in Pakistan

This research paper delves into the critical nexus between entrepreneurship and finance, focusing on entrepreneurs' challenges and strategies in accessing and utilizing financial resources to increase growth. The study highlights the fundamental role of finance in enabling small entrepreneurial ventures to thrive and contribute to economic development. It then proceeds to identify key challenges, including access to capital, financial literacy gaps, and regulatory barriers that hinder entrepreneurial finance. Through a comprehensive review of existing literature and case studies, the paper explores the various strategies entrepreneurs employ to overcome these challenges, including traditional financing methods, alternative funding sources such as crowdfunding, venture capital, and financial management techniques. Additionally, the research discusses the evolving landscape of fintech solutions and their impact on facilitating access to finance for entrepreneurs. Moreover, it examines the role of government policies and institutional support in fostering an enabling environment for entrepreneurial finance. The results of this study present valuable recommendations for policymakers, financial institutions, and entrepreneurs seeking to understand the complex landscape of entrepreneurial finance and focus on strategies to exploit the full potential of innovative ventures.

External factors affecting entrepreneurial financial governance strategies of the technical universities in Ghana

The study examined important external elements that have an impact on the technical universities (TUs) in Ghana's entrepreneurial financial governance methods. It highlights the difficulties TUs have managing their finances and the critical role that entrepreneurial finance plays in overcoming these financial limitations. A questionnaire was used by respondents as the data gathering tool in the researcher's quantitative investigation. Purposive sampling was utilised in the study to choose the 160 respondents that participated. According to the study, external environmental factors like political and economic factors, regulatory boundaries set by the state, competition between TUs, insufficient budgetary allocation, inefficient financial monitoring systems, and a lack of dynamic capabilities all have a significant impact on entrepreneurial financial governance strategies. According to the study, technical universities (TUs) in Ghana can increase revenue production, augment government financing, and satisfy their objective of offering high-quality education by applying creative initiatives and improving financial governance processes. This study offers policymakers and key stakeholders in the education sector useful insights to improve the financial sustainability and performance of Technical Universities (TUs) in Ghana. It does this by doing a thorough examination of the external environment and its impact on financial governance initiatives. Through an analysis of the effects of political and economic variables, insufficient budgetary provisions, and inadequate financial monitoring frameworks, this research highlights the imperative for Technical Universities in Ghana to give special consideration to these external elements

Gender Gap in Business Angel Financing

Abstract This study explores the impact of gender on entrepreneurial finance, analyzing both the supply and demand sides of early-stage equity financing through Business Angel (BA) investments. The research investigates the probability of men and women-owned businesses securing BA investments and assesses whether the gender of BA investors influences financial transaction magnitudes, potentially disadvantaging women-owned businesses. Additionally, the study explores the intersection between the gender of BA investors and investees to test for the presence of any potential heterogenous behaviors in terms of average invested amounts by men (women) Business Angels towards women-(men-) owned target companies. Results reveal that women entrepreneurs receive less equity financing than men, with a lower probability of securing larger investments from men BAs. Notably, this bias is absent when women BAs invest in men-owned businesses. These patterns persist regardless of information availability and consideration of unobservable factors, suggesting a connection between this disadvantage and taste-based prejudice among men BAs.

A novel framework for analyzing the impact of COVID-19 on entrepreneurial financial firms in Jordan

PurposeCOVID-19 has rendered many firms' business models, strategies and performance vulnerable, including entrepreneurial financials. Some managed to survive, while others drowned in the epidemic swamp. This study offers an exceptional model to fill the gap.Design/methodology/approachEmploying a rigorous qualitative design, the study utilizes a novel framework that integrates institutional theory (IT) and corporate entrepreneurial strategy (CES). Semi-structured interviews were conducted, and thematic analysis identified key themes: external environment, institutional environment and organizational response, CES and performance and survival.FindingsThe study reveals the dual nature of the external and institutional environment, acting as both facilitators and barriers for entrepreneurial financial firms (EFFs). It highlights the robust CES exhibited by these firms during the pandemic, demonstrating their adept balancing and integration of different CES components in their organizational response. The EFFs employ a mix of financial and nonfinancial indicators for performance assessment, yielding varied outcomes based on contextual factors.Practical implicationsEFFs and stakeholders are guided to adapt their business models, balance institutional pressures, implement CES and evaluate performance. It advocates collaboration within the entrepreneurial finance ecosystem and leveraging opportunities emerging from the pandemic, including new market segments, technologies, innovations and regulatory changes.Originality/valueThis topic is underexplored in many emerging economies. Fresh perspectives and rigor frameworks are developed on how EFFs navigate and capitalize on the pandemic under uncertainties.

Climate issues in portfolio investment decisions: a comparison of Private equity and venture capital

ABSTRACT Private equity (PE) and venture capital (VC) firms increasingly consider climate issues in their portfolio investment decisions. However, what are the underlying motives and which exact consideration strategies are employed? Based on the responses of 479 VC and 215 PE fund managers from two large surveys carried out in 2021, four motives emerge: ethical responsibility, responding to external stakeholders, product differentiation, and portfolio performance. Responding to external stakeholders and portfolio performance motives matter more to PE firms, while the product differentiation motive is more important for VC firms. No difference is found with respect to ethical responsibility as a motive. Regarding climate consideration strategies, screening strategies (positive and negative) are the most popular. Differences between VC and PE firms exist, and the motives to consider climate issues have an impact on the strategies employed. The implications for policymakers and the entrepreneurial finance sector are discussed.