The paper investigates young firms' choice of capital source. Our theoretical model hypothesizes a positive (negative) relation between riskiness of the project (price of venture capital) and receiving informed equity. We test our predictions by employing a unique data set collected by KfW...

External finance is central for nascent entrepreneurs, people in the process of starting new ventures. We argue that nascent entrepreneurs use patents and prototypes in order to signal their ability to appropriate the returns from their innovation as well as the projectś feasibility. Our...

External finance is central for nascent entrepreneurs, people in the process of starting new ventures. We argue that nascent entrepreneurs use patents and prototypes in order to signal their ability to appropriate the returns from their innovation as well as the project’s feasibility. Our...

We analyze the relation between different forms of debt financing at the firm's start-up and subsequent firm outcomes. We distinguish between business debt, obtained in the name of the firm, and personal debt, obtained in the name of the firm's owner and used to finance the start-up firm....

In this article, we examine how startup firms finance their operations over time. We empirically test the financial growth cycle theory developed by Berger and Udell (1998) using the Kauffman Firm Survey data, the largest longitudinal data set comprised of all U.S. startups launched in 2004....

Venture debt, or loans to rapid-growth start-ups, is a puzzle. How are start-ups with no track records, positive cash flows, tangible collateral, or personal guarantees from entrepreneurs able to attract billions of dollars in loans each year? And why do start-ups take on debt rather than rely...

We extend a model developed by Evans and Jovanovic (1989) to explain when start-ups are credit constrained. We show that the magnitude of the credit constraint is conditioned by the relative productivity of human capital in both wage work and self-employment. The effect of predicted household...

Using a data set of the firms listed on the Neuer Markt in Germany, this paper demonstrates that venture backed firms differ from firms with other financial resources, especially debt. Thus, the results of this study provide evidence for the hypothesis that small and innovative firms are more...

We study the implications of ownership and its induced incentives on firm survival on the stock market for young and high-tech firms. Using a unique data set of all 341 firms listed on the Neuer Markt, the German counterpart of the NASDAQ, our results differ from studies on more traditional...

External finance is central for nascent entrepreneurs, people in the process of starting new ventures. We argue that nascent entrepreneurs use patents and prototypes in order to signal their ability to appropriate the returns from their innovation as well as the project´s feasibility. Our...