We examine whether and how investors' reliance on financial information is affected by the rate of sales growth of a start-up venture. We find that investors discern between firms by the extent to which their products are adopted by the market. For firms that failed to increase their sales since...

If control of their firms allows entrepreneurs to derive private benefits, it also allows other controlling parties. Private benefits are especially relevant for venture capitalists, who typically get considerable control in their portfolio firms, but not for banks, which are passive loan...

This paper investigates the influence of social capital on young firms' financing arrangements. Using a sample of U.S. start-ups, I find that social capital, as captured by secular norms and social networks in the entrepreneur's county, increases access to outside financing and reduces reliance...

We study entrepreneurs' start-up financing from banks and local financiers. An informal network, whose membership cannot be observed by outsiders, conveys the good signals it gets about the hidden types of network entrepreneurs to local financiers, which are then reflected in different loan...

We study entrepreneurs' start-up financing from banks and local financiers. An informal network, whose membership cannot be observed by outsiders, conveys the good signals it gets about the hidden types of network entrepreneurs to local financiers, which are then reflected in different loan...

Much of the research on entrepreneurial exit has focused upon exit as a dichotomous outcome whereby exit is viewed negatively and survival, positively. This perspective is quite different from that of practicing entrepreneurs, who are more likely to be concerned with various types of exits,...

Innovation often takes place in entrepreneurial ecosystems. We use the history of the Silicon Valley venture capital model and the Hollywood motion picture industry to illustrate how specialized institutions that regulate these entrepreneurial ecosystems emerged through actions by business...

Startups face a trade-off between short-term profitability versus long-term growth where investors tolerate prolonged financial losses. We present a new theory and empirical evidence about the existence and shape of so-called J-curves. The theory predicts that investors facing better exit...

The conventional wisdom is that entrepreneurs seek financing for their high-growth, high-risk start-up companies in a particular order. They begin with friends, family, and bootstrapping. Next they turn to angel investors, or accredited investors (and usually ex-entrepreneurs) who invest their...

Although nascent ventures have not yet developed a performance-based reputation, the individual reputations of their founders, based on the performance of their earlier ventures, can function as important signals to investors. Selection system theory distinguishes between different types of...