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This paper seeks to understand the dynamics of new venture financing across 20 business start‐ups.

A total of 20 cases were explored, via initial discussions with the founder(s), and follow‐up contact to confirm sources of financing acquired during new venture creation. This approach was adopted because of the challenges associated with acquiring full details of start‐up financing, and in particular informal forms of new venture financing.

Significant variation in, and scale of, new venture financing was identified. In multiple cases, funding patterns did not tally with established explanations of small business financing.

The primary limitation of the analysis is the focus on a small number of individual cases. Although this allowed for more detailed analysis, it does not make the findings applicable across the small business population as a whole. New ventures acquired very different forms of finance, and in different configurations or “bundles”, so creating a wide range of start‐up financing patterns and overall levels of capitalisation. This suggests that multiple factors influence founder decisions on start‐up funding acquisition. It also indicates the wide divergence between highly capitalised and under‐capitalised start‐ups.

Many of the new ventures were started with low levels of capitalisation, which as the literature suggests is a strong determinant of reduced prospects for survival. This suggests a possible “financing deficit”, rather than gap, for a proportion of business start‐ups.

The paper provides an alternative methodology for considering new venture financing, and as a result concludes that standard, rational theories of small business financing may not always hold for new ventures.

Take the image of the entrepreneur as a driven accepter of risk, an individual (or set of individuals) hungry to amass a fortune as quickly as possible. This image is consistent with the traditional finance theory view of entrepreneurial startups, one that assumes that profit maximization is the firm’s sole motivation (Chaganti, DeCarolis & Deeds, 1995). Myers’s (1994) cost explanation of the pecking order hypothesis (i.e. entrepreneurs prefer internally generated funds first, debt next, and external equity last) incorporates this economically rational view of entrepreneurs’ financing preferences. According to this view, information asymmetry and uncertainty make the availability of external financing very limited and the cost of it prohibitively high. To compensate, entrepreneurs must give up greater and greater control in order to “buy” funds needed to achieve the desired growth and profitability. Indeed, Brophy and Shulman (1992, p. 65) state, “Those entrepreneurs willing to relinquish absolute independence in order to maximize expected shareholder wealth through corporate growth are deemed rational investors in the finance literature.” Undoubtedly, cost and availability explanations of financing choices are valid for many new and small businesses. However, many entrepreneurship researchers have long been dissatisfied with the incompleteness of this perspective.

The chapter provides a practical guide to identify and define different funding sources for entrepreneurial and innovation endeavors, including a methodology to describe return on investment expectations from funding sources. Also, the authors provide recommended key performance indicators and valuation methods when pitching to potential investors.

The purpose of this paper is to explore the relationship between low-wealth business founders in the USA and external startup funding. Specifically, the authors test whether a founders’ low personal net worth is correlated with a lower probability of acquiring funding from outside sources during the business creation process.

The authors use a double-hurdle Cragg model to jointly estimate: first, the decision to acquire external financing; and second, the amount received. The sample is the US-based Panel Study of Entrepreneurial Dynamics II (PSED II). The PSED II tracks business founders attempting to start ventures from 2005 to 2012.

Receipt of outside financing during business formation is largely determined by the business founder’s personal finances (controlling for human capital, venture type and industry, and whether money was sought in the first place). A higher household net worth results in larger amounts of external funding received. Low-wealth business founders, therefore, are less likely to get external funds, and they receive lower amounts when they do. The disparity between low-and high-wealth business founders is more pronounced for formal, monitored sources of external financing such as bank loans.

Because the study eliminates survivor bias by using a nationally representative sample of business founders who are in the venture creation process, the findings apply to both successful business founders and those who disengaged during the business creation process. The authors offer insights into the sources and amounts of external funds acquired by individuals across all levels of wealth. The authors accomplish this by disaggregating business founders into wealth quintiles. The study demonstrates the importance of personal wealth as a factor in acquiring external startup financing compared to human capital, industry, or personal characteristics.

If the ability to acquire external funding is significantly constrained, the quality of the opportunity and the skill of the business founder may be less a determinant of success at creating a new business as prior studies have suggested. Consequently, entrepreneurship (as measured by business formation) as a path toward upward, socioeconomic mobility will be afforded only to those individuals with sufficient financial endowments at the outset.

Unlike prior studies, the data used are not subject to survivor bias or an underrepresentation of self-employment. The statistical model jointly estimates acquisition of financing and the amount received. This resolves selection and censoring problems. Finally, the dependent variables directly measure liquidity constraints in the context of business formation, that is, before a new venture is created. Prior research contexts have typically studied existing businesses, and are therefore not true examinations of conditions affecting business creation.

Among nascent entrepreneurial ventures, are some types of bootstrapping techniques more successful than others? We compare externally oriented and internally oriented techniques with respect to the likelihood of becoming an operational venture; and we compare cash-increasing and cost-decreasing techniques with respect to becoming operational. Using data from the first Panel Study of Entrepreneurial Dynamics, we find evidence suggesting that when bootstrapping a new venture, the percentage of cash-increasing and cost-decreasing externally oriented bootstrapping techniques that a ventureʼs owners use are positive predictors of subsequent positive cash flow (one and two years later). But, internally oriented techniques are not related to subsequent cash flow.

This study proposes a portfolio of new venture signals that are likely to attract investors' attention in the context of an emerging market and examines how they work in combination to affect the likelihood of obtaining funding.

The authors use data on early-stage venture capital investments for high-tech start-ups in Turkey. The authors adopt a configurational approach and use fuzzy QCA and regression analysis.

The findings suggest that financing of new ventures in an emerging economy is shaped by signals of context-specific capabilities that are required to survive and thrive in this market environment alongside and in interaction with signals of general capabilities required for business success. Different combinations of these signals provide equifinal pathways to obtain funding. Furthermore, signals that differ in type and content interact in complex ways to affect investors' decisions.

The findings suggest that entrepreneurs with no prior experience in the emerging market context can increase their chances of obtaining funding by affiliating with a venture development organization. Another promising strategy is to form a founding team that includes members affiliated with a developed country together with members who have emerging market experience. Finally, entrepreneurs may consider combining signals of context-specific capabilities with signals of general capabilities as they work in a complementary way to attract funding.

This study addresses two major shortcomings of the literature on new venture signaling, first, by positing the emerging market context as a unique signaling environment and, second, by demonstrating the value of considering signals as portfolios with potential interdependencies.

The purpose of this paper is to investigate the impact of social capital of non-resident family members on small business debt financing. Recent literature in entrepreneurship suggests that small businesses can borrow social capital to improve their access to debt financing.

Micro-entrepreneurs from India were interviewed regarding their ability to raise capital from family members as well as their relationship with banks and politicians.

The survey indicates that small business entrepreneurs are able to borrow social capital from non-resident Indians. Results also suggest that these small businesses are more likely to be connected to banks and politicians facilitated by their non-resident family members, which not only improves micro-entrepreneurs’ access to debt financing but also reduces their cost of borrowing.

This is a co-relational study that investigates the association between social capital of non-resident family members and small business debt financing. There is not necessarily a causal relationship between the two. The findings of this study may only be generalized to firms similar to those that were included in this research.

This study contributes to the literature on the factors that improve the access to small business debt financing. The findings may be useful for financial managers, investors, financial management consultants, entrepreneurs, and other stakeholders.

Past entrepreneurship research has emphasized the importance of the context of the entrepreneur (e.g., personality) along with environmental characteristics as predictors of the success of new ventures. Additional literature has expanded our understanding of how implementation processes such as business planning, social networking, and external financing may be key to new venture performance. This paper offers 12 propositions that link these two literatures. Specifically, we argue that the personality and goals of the entrepreneur, as well as the dynamism and munificence of the environment, may affect how well implementation processes enhance new venture performance.

The purpose of this paper is to examine the impact of human and intellectual capital on start-ups’ attainment of government venture capital (GVC). It is theorized that as a result of government predisposition toward enhancing knowledge spillover and certifying underinvested start-ups, different types of human and intellectual capital possessed by start-ups will distinctly affect GVC funding.

The Kauffman Firm Survey, a panel data set of 4,928 new US firms over a five-year period (2004-2008), serves as the data source. Ordinary least squares regression, coupled with generalized estimating equations to check for robustness, is used to determine the effect of human and intellectual capital on GVC funding.

Founders’ educational attainment has a greater impact than their occupational experience in GVC funding. While the number of patents owned by the start-up increases GVC funding, the number of trademarks and copyrights negatively influence GVC funding.

By distinguishing between different aspects of human and intellectual capital, this study provides a more nuanced understanding of the influence of new venture resources in the context of GVC.

This study offers empirical evidence from a nationally representative panel dataset of nascent entrepreneurs (PSED-II) regarding when external financing is acquired and how certain factors affect this timing during the cumulative process of nascent entrepreneurs taking actions toward establishing an operational entity. By assessing the relationship between the external financing event and the cumulative set of actions that nascent entrepreneurs undertake to create new businesses, we improve our understanding of how the timing of acquiring external financing affects organizational survival and growth.

We apply nonparametric and semiparametric survival analysis techniques to a nationally representative panel dataset of nascent entrepreneurs. This ascertains the probability of an external financing event at any given moment in time and a set of startup conditions that we hypothesize will affect this timing. First, we use Kaplan–Meier analysis to explore when external financing occurs during new business creation. We then use discrete-time survival analysis to investigate whether certain startup conditions affect when external financing occurs. Finally, we conduct a test of independence to examine the external financing event relative to other startup activities completed during new business creation.

Nascent entrepreneurs tend to acquire external funding relatively late in the new venture startup process – on average, about two-thirds of the way from conceiving of the idea and becoming operational. They tend to take actions that are less resource-demanding early in the startup process to build their organizations to a fundable stage. Net worth tends to speed up the acquisition of external funding as wealthy entrepreneurs tend to ask for funding earlier in the process. Finally, entrepreneurs in capital-intensive industries do not seem to get outside funding before entrepreneurs in other industries.

This study is unique in three ways. First, we investigate the timing of the highly important external financing event. Timing is critical in unpacking and making sense of the very early stages of a new business and in guiding entrepreneurs and students about when to do what. Second, we do so in a subsample of preoperational, nascent, funded entrepreneurs derived from a nationally representative panel dataset of startup attempts. Third, our findings provide a counter-intuitive yet systematic understanding of organizational emergence and very early-stage financing.