Factors influencing the fund raising process for innovative new ventures: an empirical study

Abstract

Purpose

The purpose of this paper is to identify the factors that influence the fund raising ability of innovative new ventures/startups.

Design/methodology/approach

The authors investigate a data set composed of 108 Italian innovative new ventures. Specifically, the authors run a Tobit regression model linking the amount of equity raised by the company to the human capital of the company. The authors focussed the analysis on the Chief Executive Officer (CEO) of the new company, who usually is a founder and, in the early stages, the most charismatic figure.

Findings

The analysis shows a significant relationship between the ability of a startup to raise funds and the level of education of the CEO. The findings suggest that this causal relation is even stronger as the CEO holds an MBA.

Research limitations/implications

The results of our empirical study provide further insights about the characteristics of the CEO that mostly impact on fund raising ability of the new ventures. The results are limited to startups founded by Italian entrepreneurs. A cross-country comparison will represent the natural prosecution of our research.

Practical implications

The study provides important implications for researchers and practitioners who are interested in understanding the fundamentals of the fund raising process for innovative startups. Moreover, these findings may also be helpful for policy makers in better understanding the factors potentially influencing the Italian startup ecosystem.

Originality/value

The paper sheds light on the factors affecting the fund raising process of innovative new ventures in the early stage of the company’s life cycle. Specifically, it is one of the few study focussing on the profile/background of the CEO in early-stage companies.

Citation

Talaia, M., Pisoni, A. and Onetti, A. (2016), "Factors influencing the fund raising process for innovative new ventures: an empirical study", Journal of Small Business and Enterprise Development, Vol. 23 No. 2, pp. 363-378. https://doi.org/10.1108/JSBED-07-2014-0111