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How do innovative internet tech startups attract venture capital financing?

Published online by Cambridge University Press:  26 July 2023

Yan Zhou
Affiliation:
Logistics and E-Commerce College, Zhejiang Wanli University, Ningbo, China
Sangmoon Park*
Affiliation:
College of Business Administration, Kangwon National University, Chuncheon, South Korea
Justin Zuopeng Zhang
Affiliation:
Department of Management, University of North Florida, Jacksonville, FL 32224, USA
João J. Ferreira
Affiliation:
Economics and Management Department & NECE – Research Unit in Business Sciences, University of Beira Interior, Portugal & QUT – Australian Centre for Entrepreneurship Research, Brisbane, Australia
*
Corresponding author: Sangmoon Park; Email: venture@kangwon.ac.kr

Abstract

This research uses signaling theory to combine the perspective of investment results with existing venture capital (VC) standards and reexamines the factors that influence the attractiveness of innovative internet tech startups to VC from the perspective of equal opportunity startups. Taking the financing status of 310 startups in China's sharing economy as an example and using regression analysis, we empirically test the influence of entrepreneur and firm characteristics on attracting VC. Our results show that among founder characteristics, the entrepreneur's entrepreneurial experience alone is insufficient to attract VC. Industrial experience and political background have a positive influence on attracting VC. Among firm characteristics, market-entry order and business group (BG) affiliation positively influence attracting VC. This is a new and relevant discovery. In the Chinese market, investors are more inclined to provide financial support to entrepreneurs or startups that have already gained legitimacy from the government or business groups.

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Type
Research Article
Copyright
Copyright © The Author(s), 2023. Published by Cambridge University Press in association with the Australian and New Zealand Academy of Management

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