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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 early-stage venture capital (VC) industry has long been dominated by small firms comprising senior venture capitalists and few junior staff. However, during the late 1990s, a group of firms changed their internal structures, adopting pyramidal structures and redesigning internal processes to leverage the efforts of junior staff. In doing so, they followed first-movers in other professional services industries that transitioned to pyramidal models in the 20th century. Has the recent industry downturn terminated the transition, or simply delayed it? This chapter analyzes the events that led the VC firms to transition, the barriers to doing so, and related issues affecting the industry's future.

We examine what changes, if any, firms are making to their capital structure around the time they cross-list because both of these affect a firm’s corporate governance. Cross-listing requires firms to follow SEC rules and regulations, which helps improve the firm governance. A firm’s capital structure, specifically the use of debt, is an effective way to mitigate the conflict between managers and shareholders by reducing the cash available to managers. We examine whether these governance mechanisms are complimentary or being used as substitutes by cross-listing firms.

We compare the capital structures of Level II and Level III cross-listing firms from both civil law and common law countries in the three years before and the three years after cross-listing.

We show firms are significantly reducing their debt to equity ratio after the cross-listing. This reduction is shown for both Level II and Level III firms; however, it is primarily seen in civil law countries.

The corporate governance improvement firms recognize by cross-listing is partially offset by the reduced use of debt after the cross-listing. These governance characteristics may be especially relevant for shareholders in Level III cross-listings because those firms are actually raising addition cash.

Liability of foreignness (LOF) has been one of the central constructs in the field of international business and management. Over the past two decades, a significant body of theoretical and empirical research has accumulated, theorizing on the sources of these LOFs, investigating their magnitude, and prescribing approaches to mitigate these disadvantages. However, much of this research is almost exclusively related to firms expanding their products, services, and operations to other countries as part of their global expansion. The difficulties firms face in foreign product markets is just one dimension of the costs they can face in their attempts to secure resources abroad.

We expand the domain of the LOF construct to include liabilities faced by firms accessing foreign capital markets in light of the increasing integration of capital markets. We identify four sources of LOF in capital markets: regulatory costs, information costs, unfamiliarity costs, and costs arising out of cultural differences. Based on an extensive review of “home bias” in equity markets, we propose four strategies to erase the legitimacy deficits that firms encounter in foreign capital markets: bonding, signaling, adoption of business practices isomorphic with the host country, and certifications and endorsements by third parties. We also offer suggestions for operationalizing and measuring LOF in capital markets as well as several directions for advancing further research on LOF in the context of capital markets.

The financing of entrepreneurship has seen marked changes over time and continues to evolve rapidly. From the traditional sequence of self-funding, Angel financing, the rigors of securing Venture Capital, and, for successful firms, Initial Public Offerings (IPOs), the funding sequence has undergone substantial changes. Recent observations such as in the Wall Street Journal (November 05, 2018) suggest that many successful young firms (often tech companies) have continued to raise capital from private equity sources rather than in the public equity markets via IPOs. These additional fundraising efforts generally follow an extended period of business development and revenue generation wherein when many successful entrepreneurial firms that had proven large enough to go public stayed private (so called “unicorns”) because of the extent to which their funding requirements can in recent times flow from private sources. But today, there are many indications that some such firms (e.g. Uber, Lyft) are now seeing the advantages of going public, engaging in IPOs, which are often followed rapidly in very recent times by raising additional public share capital in a relatively short interval after the IPO.

This chapter analyses how capital is raised and employed by a sample of 28 European biotechnology companies listed on Europe’s new stock markets from 1996 to 2000. We find that biotechnology companies rely heavily on IPO proceeds in order to finance their growth. We compare the behaviour of European firms to a sample of comparable U.S. firms. The analysis reveals that European companies tend to raise more capital at the IPO and to invest more aggressively in the short-run, whereas U.S. biotech firms tend to have more cash available before the IPO and invest more conservatively in the short-run.