Summary Entrepreneurship & Finance - 2021/2022
Lecture 1 - Capital structure decisions and funding gaps 2
- Capital structure theory and new technology firms: is there a match? S Coleman, A Robb -
Management Research Review, 2012 2
- Entrepreneurship and growth; M. Wright I. Stigliani - International Small Business Journal,
2012 2
Lecture 2 - Capital structure and financial bootstrapping 7
- Path Dependence in New Ventures’ Capital Structures; 7
- Funding gap, what funding gap? Financial bootstrapping, supply, demand and creation of
entrepreneurial finance 8
Lecture 3 - Resource orchestration, investor readiness 13
- Strategic entrepreneurship, resource orchestration and growing spin-offs from universities 13
- Growing fast or slow?: Understanding the variety of paths and the speed of early growth of
entrepreneurial science-based firms; 16
- Ready for funding? Entrepreneurial ventures and the pursuit of angel financing 17
Lecture 4 - Trust and investors 20
- A comparison of business angel and venture capitalist investment procedures: an agency
theory-based analysis 21
- Entrepreneur as Trust-builder: Interaction frequency and relationship duration as moderators
of the factors of perceived trustworthiness 23
- Sustaining trust to cross the Valley of Death: A retrospective study of business angels’
investment and reinvestment decisions 24
Lecture 5 - Guest lecture Jonno 27
Lecture 7 - Finance 1 29
Lecture 8 - Guest lecture Lodewijk 32
Lecture 9 - Signaling theory, narratives, and crowdfunding 32
- Convincing the crowd: Entrepreneurial storytelling in crowdfunding campaigns 32
- Extending Signaling Theory to Rhetorical Signals: Evidence from Crowdfunding 35
Lecture 10 - Finance 2 37
Lecture 11 - Digitization powering alternative finance 41
- Digitization in the Market for Entrepreneurial Finance: Innovative Business Models and New
Financing Channels 41
- New players in entrepreneurial finance and why they are there 42
Lecture 12 - Finance 3 44
Lecture 13 47
Marked text in blue = Slides Nanne
1
, Lecture 1 - Capital structure decisions and funding gaps
Capital structure theory and new technology firms: is there a match? S Coleman, A Robb -
Management Research Review, 2012
Entrepreneurship and growth; M. Wright I. Stigliani - International Small Business Journal, 2012
Capital structure theory and new technology firms: is there a match
Coleman & Robb (2012)
Abstract
● Purpose: explore the fit between theories of capital structure and new
technology-based firms.
● Methods: Descriptive statistics + multivariate results from Kauffman Firm Survey
(4000 USA firms).
● Findings: new technology based firms demonstrate different financing patterns than
firms that are not technology based.
● Implications: technology-based entrepreneurs are both willing and able to raise
substantial amounts of capital from external sources. They also need more external
sources of equity in order to launch and grow their firms.
Introduction
Technology-based firms are important contributors to the US economy. Securing funding for
new technology-based firms is particularly problematic, however. Many such firms are built
upon intellectual capital(=human capital, structural capital, relational capital) rather than on
physical assets, so it is difficult to determine the value and prospects of the firm. In this
paper we examine the financing strategies of technology-based firms using a new
longitudinal dataset of new firms. We identify not only sources of financing, but also
financing gaps. We compare the patterns of financing observed in the data with the patterns
prescribed by theory.
Capital structure theory
● Capital structure= The mix of debt and equity used by firms to finance their
long-term (fixed) assets.
● Weighted average cost of capital (WACC)= The blended cost of the various
sources of long-term debt and equity.
● Modigliani & Miller - Capital structure theory:
○ Firms will select the mix of debt and equity:
■ Maximizes the value of the firm
■ Minimizes its WACC, both of which simultaneously
■ This does not necessarily hold for new, privately held firms, because it
is based on the assumptions that there are no transaction costs of any
kind and that investors and managers have the same information
about the firm.
○ Firms have access to the full range of debt and equity alternatives.
● Myers and Majluf - Pecking order theory of finance:
2
Lecture 1 - Capital structure decisions and funding gaps 2
- Capital structure theory and new technology firms: is there a match? S Coleman, A Robb -
Management Research Review, 2012 2
- Entrepreneurship and growth; M. Wright I. Stigliani - International Small Business Journal,
2012 2
Lecture 2 - Capital structure and financial bootstrapping 7
- Path Dependence in New Ventures’ Capital Structures; 7
- Funding gap, what funding gap? Financial bootstrapping, supply, demand and creation of
entrepreneurial finance 8
Lecture 3 - Resource orchestration, investor readiness 13
- Strategic entrepreneurship, resource orchestration and growing spin-offs from universities 13
- Growing fast or slow?: Understanding the variety of paths and the speed of early growth of
entrepreneurial science-based firms; 16
- Ready for funding? Entrepreneurial ventures and the pursuit of angel financing 17
Lecture 4 - Trust and investors 20
- A comparison of business angel and venture capitalist investment procedures: an agency
theory-based analysis 21
- Entrepreneur as Trust-builder: Interaction frequency and relationship duration as moderators
of the factors of perceived trustworthiness 23
- Sustaining trust to cross the Valley of Death: A retrospective study of business angels’
investment and reinvestment decisions 24
Lecture 5 - Guest lecture Jonno 27
Lecture 7 - Finance 1 29
Lecture 8 - Guest lecture Lodewijk 32
Lecture 9 - Signaling theory, narratives, and crowdfunding 32
- Convincing the crowd: Entrepreneurial storytelling in crowdfunding campaigns 32
- Extending Signaling Theory to Rhetorical Signals: Evidence from Crowdfunding 35
Lecture 10 - Finance 2 37
Lecture 11 - Digitization powering alternative finance 41
- Digitization in the Market for Entrepreneurial Finance: Innovative Business Models and New
Financing Channels 41
- New players in entrepreneurial finance and why they are there 42
Lecture 12 - Finance 3 44
Lecture 13 47
Marked text in blue = Slides Nanne
1
, Lecture 1 - Capital structure decisions and funding gaps
Capital structure theory and new technology firms: is there a match? S Coleman, A Robb -
Management Research Review, 2012
Entrepreneurship and growth; M. Wright I. Stigliani - International Small Business Journal, 2012
Capital structure theory and new technology firms: is there a match
Coleman & Robb (2012)
Abstract
● Purpose: explore the fit between theories of capital structure and new
technology-based firms.
● Methods: Descriptive statistics + multivariate results from Kauffman Firm Survey
(4000 USA firms).
● Findings: new technology based firms demonstrate different financing patterns than
firms that are not technology based.
● Implications: technology-based entrepreneurs are both willing and able to raise
substantial amounts of capital from external sources. They also need more external
sources of equity in order to launch and grow their firms.
Introduction
Technology-based firms are important contributors to the US economy. Securing funding for
new technology-based firms is particularly problematic, however. Many such firms are built
upon intellectual capital(=human capital, structural capital, relational capital) rather than on
physical assets, so it is difficult to determine the value and prospects of the firm. In this
paper we examine the financing strategies of technology-based firms using a new
longitudinal dataset of new firms. We identify not only sources of financing, but also
financing gaps. We compare the patterns of financing observed in the data with the patterns
prescribed by theory.
Capital structure theory
● Capital structure= The mix of debt and equity used by firms to finance their
long-term (fixed) assets.
● Weighted average cost of capital (WACC)= The blended cost of the various
sources of long-term debt and equity.
● Modigliani & Miller - Capital structure theory:
○ Firms will select the mix of debt and equity:
■ Maximizes the value of the firm
■ Minimizes its WACC, both of which simultaneously
■ This does not necessarily hold for new, privately held firms, because it
is based on the assumptions that there are no transaction costs of any
kind and that investors and managers have the same information
about the firm.
○ Firms have access to the full range of debt and equity alternatives.
● Myers and Majluf - Pecking order theory of finance:
2
