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Show Me the Right Stuff: Signals for High‐Tech Startups
Author(s) -
Conti Annamaria,
Thursby Marie,
Rothaermel Frank T.
Publication year - 2013
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/jems.12012
Subject(s) - venture capital , incubator , sample (material) , business , value (mathematics) , investment (military) , social venture capital , commerce , business administration , economics , finance , computer science , chemistry , chromatography , machine learning , politics , law , political science , microbiology and biotechnology , biology
We present a theoretical model of startup signaling with multiple signals and potential differences in external investor preferences. For a novel sample of technology incubator startups, we empirically examine the use of patents and founder, friends, and family (FFF) money as such signals, finding that they are jointly endogenous to venture capital and business angel investment in the startups. For this sample, venture capitalists appear to value patents more highly than FFF money, while the reverse is true for business angels. Moreover, the impact of patents on venture capitalists is larger than the impact of FFF money on business angels .