Initial Funding and Founders’ Human Capital : An Empirical Analysis Using Multiple Surveys for Start-Up Firms

This study explores the use of initial funding sources, using a unique sample of various types of start-up firms in Japan obtained from multiple surveys. We provide evidence on differences in the use of initial funding sources and their determinants across start-up firms, estimating a multivariate probit model. Our findings indicate that founders’ human capital, entrepreneurial commitment, growth orientation, innovativeness, physical capital, and the presence of predecessors or parent firms are important determinants of the choice of initial funding sources. Specifically, while start-up firms with growth orientation and those that engage in innovative activity are more likely to use subsidies and funds from private equity investors, those with physical capital are more likely to use bank borrowing. Our findings suggest that we should have a more nuanced view of the determination of initial funding depending on firm/founder types