The lack of financing channel and absence of transparent entrepreneurial environment cause many difficulties for early stage high-tech start-ups. Venture capital firms not only provide sufficient funds for start-ups, but also provide them with other value added services, including management consulting and relationship building services. Therefore, venture capital becomes one of the most common sources of professional funding for those high-tech start-ups. It is worth studying how and to what extent those start-ups can receive venture capital. Existing research has found that founders' social capital, one of the most prominent concepts in the field of financing, can significantly increase the start-ups' probability to receive venture capital funding. High level of founders' social capital is expected to decrease information asymmetry between investors and start-ups, to signal start-ups' long-term potential for network construction and business development to investors, so as to enhance venture capital's trust in start-ups and finally to improve the probability for start-ups to receive venture capital funding. Prior research has identified four dimensions of social capital, all of which are crucial to accessing financing resources. However, despite increased research interest, the effect of founders' social capital on start-up's access to venture capital remains unclear. Additionally, which dimension of social capital has more important effect on venture capital financing has been still largely ignored. This paper collects survey data from 256 early stage high-tech start-ups, with one respondent per firm. Firstly, the paper adopts the Probit model to test the effect of founders' network structure on start-ups' access to venture capital. The empirical result demonstrates that the founders' network size and network heterogeneity both have significantly positive impact on venture capital financing; however, the high level of network strength and network density don' t have significantly positive impact on venture capital financing. The paper then uses the method of least squares to test the effect of founders' network structure on the amount of funding start-ups received in the first round financing. The empirical result shows that the founders network size and network heterogeneity still receive higher amounts of venture capital funding while the high level of network strength and network density can't yield high venture capital financing. These results indicate that venture capital firms assign higher value to founders with bridging network structure than those with bonding network structure. The subsequent robustness checks don't draw different conclusions. This paper is the first research attempt to examine the impacts of founder's network structures on access to venture capital and their influential mechanism from the structural perspective of social capital and signal theory. Our work demonstrates the coexistence of four forms of founders' social capital rather than one simple dimension of social capital, and analyzes their importance and effects on start-ups financing. Our theory and findings complement recent studies which offered mixed results regarding the effects of social capital on start-ups financing. Empirical results reveal that founders' bridging network structure plays a more important role than bonding network structure in venture capital financing, thus contributing to the literature on social capital theory and financing theory. Therefore, it is suggested that founders of early stage high-tech start-ups should devote themselves to exploring new relationship channels and establishing diverse relationship networks. Additionally, founders are supposed to reduce their excessive dependence on existing relations. It is also suggested for the government to encourage start-ups to build more connections and to create diverse networks of relationships between investors and founders of start-ups, thus bringing relief to start-ups with financing constraints.
姚铮 顾慧莹. 创始人社会资本结构特征对科技型创业企业风险投资可得性的影响[J]. 浙江大学学报(人文社会科学版), 2019, 5(1): 195-.
Yao Zheng Gu Huiying. The Effect of Founders' Network Structure of Social Capital on the Venture Capital Availability of High-tech Start-ups. JOURNAL OF ZHEJIANG UNIVERSITY, 2019, 5(1): 195-.