Will the startup succeed in your eyes? Venture evaluation of resource providers during entrepreneurs' informational signaling.
Wesley II, Curtis L.; Kong, Dejun Tony; Lubojacky, Connor J.; Kim Saxton, M.; Saxton, Todd. Will the startup succeed in your eyes? Venture evaluation of resource providers during entrepreneurs' informational signaling. Journal of Business Venturing. Sep2022, Vol. 37 Issue 5, pN.PAG-N.PAG.ÌýÌýÌýÌý
Experienced founders and investors are arguably the venture community members most likely to possess needed financial and social resources for startups. We present a model of venture evaluation where entrepreneurs solicit these resource providers for needed financial and social resources. Our model addresses how resource providers' venture investment propensity influences their evaluation of entrepreneurs' informational signals and how their venture evaluation predicts their willingness to provide financial and social resources. We test our model using real-time decisions and find resource providers with founding experience (both non-investor founders and investors with founding experience) leverage their investment propensity more than non-founder investors when evaluating new ventures. In addition, our post-hoc analysis reveals that resource providers' founding experience is associated with their willingness to confer social resources. Overall, this paper focuses on the perspective of resource providers and addresses how their investment propensity, types of venturing experience, and venture evaluation influence their willingness to render resource support to new ventures. • In the nascent stages of new venture creation, resource providers' interpretation of entrepreneurs' informational signals determines their evaluation of future venture success, which in turn determines whether they are willing to provide financial (investment funds) and social resources (advice and recommendations to others). • Resource providers' type of venturing experiences moderates the relationship between investment propensity, a domain-specific risk propensity, and their evaluation of entrepreneurs' informational signals (i.e., future venture success). • Resource providers with founding experience (i.e., non-investor founders, and investors with founding experience) are more likely to leverage their investment propensity when evaluating future venture success than those without founding experience (i.e., non-founder investors). • Resource providers with founding experience are more likely to confer social resources to support new ventures than those without founding experience.ÌýÌýÌý
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