The Financing of Entrepreneurial Ventures Vom Fachbereich Rechts- und Wirtschaftswissenschaften der Technischen Universität Darmstadt zu Erlangung des akademischen Grades Doctor rerum politicarum (Dr. rer. pol.) genehmigte Dissertation von Alexander Huber, M.Sc. geboren am 26.02.1987 in München Erstgutachterin: Prof. Dr. Carolin Bock Zweitgutachter: Prof. Dr. Peter Buxmann Tag der Einreichung: Tag der mündlichen Prüfung: 29.11.2017 08.02.2018 Hochschulkennziffer: Darmstadt D17 2018 ii Wissenschaftlicher Werdegang nach § 20(3) der Promotionsordnung der Techni- schen Universität Darmstadt Herr Alexander Christian Huber, geboren am 26.02.1987 in München, begann seine wissenschaftliche Ausbildung im Jahr 2006 mit einem Studium der internationalen Be- triebswirtschaft an der Hanze University of Applied Sciences in Groningen in den Nie- derlanden. Nach seinem Abschluss als Bachelor of Business Administration im Jahr 2010 arbeitete Herr Alexander Christian Huber bei der Pricewaterhousecoopers AG WPG im Bereich Advisory Transaction Services – Valuation & Strategy in München ehe er im Jahr 2012 mit dem Studium der Technologie- und Managementorientierten Be- triebswirtschaftslehre an der Technischen Universität München begann. Die Schwer- punkte seines Studiums umfassten die Bereiche Finance & Accounting sowie Maschi- nenwesen (Produktionstechnik). Herr Alexander Christian Huber fertigte seine Master- arbeit mit dem Titel: The development of research-based spin-offs: An empirical analysis am Lehrstuhl für Entrepreneurial Finance von Frau Prof. Dr. Dr. Achleitner an. Im An- schluss an seinen Abschluss als Master of Science wechselte Herr Alexander Christian Huber an das Fachgebiet Gründungsmanagement von Frau Prof. Dr. Carolin Bock am Fachbereich Rechts- und Wirtschaftswissenschaften der Technischen Universität Darm- stadt und fertigte seine Dissertation mit dem Titel: The Financing of Entrepreneurial Ventures an, welche er am 29. November 2017 einreichte und am 8. Februar 2018 mündlich verteidigte. iii Declaration of Authorship I, Alexander Huber, born February 26th 1987 in Munich, hereby declare that the sub- mitted thesis is my own work. All quotes, whether word by word or in my own words, have been marked as such. The thesis has not been published anywhere else nor pre- sented to any other examination board. Hiermit erkläre ich, Alexander Huber, geboren am 26.02.1987 in München, an Eides statt, dass ich die vorliegende Dissertation ohne fremde Hilfe und nur unter Verwen- dung der zulässigen Mittel sowie der angegebenen Literatur angefertigt habe. Die Arbeit wurde bisher keiner anderen Prüfungsbehörde vorgelegt und auch noch nicht veröffentlicht. Darmstadt, 29.11.2017 _________________________ (Alexander Huber) iv Abstract Entrepreneurship and entrepreneurial activities influence the development and well- being of both economies and societies to a large extent. At the heart of all entrepreneur- ial activities are new ventures - vehicles which entrepreneurs use in order to exploit opportunities through the commercialization of newly developed products or services. In addition to the many obstacles entrepreneurs face when creating a new venture and entering new markets, the financing of these entrepreneurial initiatives becomes a large obstacle. In particular, uncertainties regarding market acceptance of the identified op- portunity and thus survival and ultimately growth limit the financing options of new ventures notably. Further, the financing decisions made at the beginning of the entre- preneurial process have a lasting impact on the development of the new venture once a certain type of financing is acquired. Hence, securing the necessary financing is not only a major challenge for the entrepreneur at the beginning of the entrepreneurial career. The selection of the right amount of financing from the right source also influ- ences the development of the new venture over and beyond the early days of existence. In line with this argumentation and while acknowledging the limited number of financ- ing options available to new ventures, venture capital is often identified as a viable option for firms during in their early stages of development. This form of financing is characterized to be provided by institutional investors that jointly invest financial means, experience, and networks into the firms they consider to be able to generate the desired growth in return. Given the large array of new ventures however, only a few are considered a potential investment, and thereof only a fraction receives the necessary funding. Regarding the latter group of investees however, a venture capital investment has empirically proven to positively influence new venture survival and growth, trans- lating into increased performance of venture capital-backed over non-venture capital- backed firms. Given the fact that venture capital itself is a fascinating field of research but likewise of great importance for the financing of new ventures at the same time, this dissertation develops new empirical insights about the role of venture capital in the context of new ventures that were created in an academic context. Further, crowdfund- ing as a new means of entrepreneurial finance is analyzed against the background of its signaling value in the investment decision of venture capitalists. v The first empirical contribution uses a proprietary dataset of 98 German research-based spin-offs founded between 1997 and 2012 and assesses which firm-specific and system- inherent factors are decisive for the spin-offs’ growth while drawing on the resource- based view of the firm as theoretical framework. Specifically, this dissertation aims to evaluate whether venture capital-backed research-based spin-offs outperform non ven- ture capital-backed research-based spin-offs and whether a performance difference is explained by venture capitalists’ scouting or coaching capabilities. The empirical find- ings suggest that a homogeneous educational background of the academic entrepre- neurs is positively associated with the research-based spin-off’s growth. Similarly, a training provided by the parent research organization intended to develop entrepre- neurial skills and to establish a network to outside professionals as well as the commer- cialization of a novel technology have a positive impact on a research-based spin-off’s growth. Concerning the involvement of venture capitalists, venture capital-backed re- search-based spin-offs show a superior employment and revenue growth compared to non-venture capital-backed research-based spin-offs. As a possible cause for this supe- rior performance, the empirical findings support the view that this growth difference can be attributed to venture capitalists’ coaching rather than their scouting capabilities. The second empirical contribution addresses the increasing popularity of crowdfunding as a new means to finance new ventures. In particular, this dissertation assesses whether and how crowdfunding campaign-specific signals that affect campaign success influence venture capitalists’ selection decisions in new ventures’ follow-up funding rounds. By doing so, this empirical contribution relies on cross-referencing a proprietary dataset of 66,000 crowdfunding campaigns that ran on Kickstarter between 2009 and 2016 with 100,000 investments in the same period from the Crunchbase dataset. Using this approach, 267 new ventures with at least one crowdfunding campaign could be identified. While drawing on signaling theory and the venture capital and microfinance literature, the empirical findings reveal that a successful crowdfunding campaign leads to a higher likelihood to receive follow-up venture capital financing, and that an in- verted U-shaped relationship exists between the funding received compared to the fund- ing desired and the probability to receive venture capital funding. Further, the analyses provide statistical evidence that a special endorsement of campaigns by the crowdfund- ing platform provider as well as social media presence in the form of word-of-mouth vi volume has a likewise positive impact on the receipt of follow-up venture capital. Inter- preting these findings, this dissertation concludes that the results support the view that venture capitalists apparently rely on the decision of the crowd in order to evaluate the potential of the entrepreneurial initiative when selecting new investment opportunities. Over and beyond the signals that a crowdfunding campaign produces and that are ap- parently factored into the investment decision of venture capitalists, this dissertation also elaborates on how the presence of a crowdfunding campaign itself, disregarding all its campaign-relevant aspects, influences the investment decision of venture capital- ists in terms of their decision to form syndicates. For the purpose of this research ques- tion, this dissertation relies again on signaling theory and builds on the syndication literature. The overarching empirical finding is that crowdfunding seems to influence the syndication behavior of venture capitalists. For one thing, the presence of a crowd- funding campaign negatively influences both the likelihood of a syndicated investment as well as the number of syndicate partners. For another, the findings reveal that crowd- funding positively influences the formation of international syndicates. Hence, the re- sults support the assumption that the importance of crowdfunding is also factored into the investment decision of venture capitalists in terms of their decision to syndicate. This dissertation concludes with the major contributions for both theory and practice. In essence, the results derived provide novel insights about growth factors of research- based spin-offs by widening the focus of analysis. This is done by incorporating venture capital into the research scope so as to advance the resource-based view of the firm. Also, this dissertation shows that crowdfunding serves as a catalyst reducing the per- ceived risk in the form of information asymmetries related to new ventures. Thus, this dissertation advances signaling theory and also provides important implications for the microfinance and VC literature. vii Zusammenfassung Das Unternehmertum hat einen wesentlichen Einfluss auf die Entwicklung von Wirt- schaft und Gesellschaft. Eine der essentiellsten Ausprägungen des Unternehmertums ist dabei die Gründung von neuen Unternehmen durch eine oder mehrere Personen um neue, zum Teil innovative, Geschäftsgelegenheiten in der Form von Produkten und/o- der Dienstleistungen auf lokalen wie internationalen Märkten abzuschöpfen. Ungeach- tet der zahlreichen Herausforderungen, mit welchen Unternehmensgründer in Folge des heterogenen Aufgabenspektrums vor, während und nach einer Unternehmensgrün- dung insgesamt konfrontiert sind, ist die Finanzierung eines neuen Unternehmens mit- unter eine der zentralen Herausforderungen die es für den Unternehmer zu bewältigen gibt. Aufgrund der großen Unsicherheit hinsichtlich der Erfolgsaussichten neuer Pro- dukte und Dienstleistungen ist das Überleben und Wachstum einer Neugründung alles andere als selbstverständlich und auch ein wesentlicher Grund dafür, dass die Finan- zierungsoptionen für Unternehmensgründer beschränkt sind. Darüber hinaus ist die Wahl der Finanzierung insofern von großer Bedeutung, da wissenschaftliche Erkennt- nisse nahelegen, dass die Entscheidung über die Wahl einer bestimmten Finanzierungs- form eine nachhaltige Auswirkung auf die Entwicklung des Unternehmens hat. Aus die- sem Grund ist nicht nur die Wahl der Finanzierungsform eine große Herausforderung für den angehenden Unternehmer, sondern wird zudem durch die nachhaltige Wirkung derselben zu einer großen Herausforderung für Unternehmensgründer insgesamt. Aufgrund der Unsicherheit über die zukünftige Entwicklung der Unternehmung und einer kurzen bis kaum vorhandenen Unternehmenshistorie einer Neugründung wird Risikokapital in Form von sog. Venture Capital Investoren oftmals als die am geeig- netste Form der Finanzierung gesehen. Diese Risikokapitalinvestoren zeichnen sich durch ihren professionell-institutionellen Charakter aus und bieten dem finanzierten Portfoliounternehmen nicht nur finanzielles Kapital, sondern vielmehr auch ein breites Spektrum an nicht-monetären Zusatzleistungen wie beispielsweise den Zugang zu Netz- werken. Zeitgleich ist die Akquisition von Risikokapital durch den Unternehmer auf- grund der hohen Anzahl an möglichen Neugründungen als Investitionsobjekt sehr kom- petitiv und daher schwierig. Dies zeigt sich dadurch, dass nur wenige Neugründungen den selektiven Auswahlprozess eines Risikokapitalgebers überstehen, und davon nur viii ein Bruchteil die notwendige Finanzierung nach einer detaillierten Prüfung erhält. Die- jenigen Unternehmen, die den Selektionsprozess erfolgreich durchlaufen haben, weisen jedoch eine erhöhte Überlebenswahrscheinlichkeit und ein stärkeres Wachstum gegen- über denjenigen Unternehmen auf, die kein Risikokapital erhalten haben. Dahingehend bestätigen wissenschaftliche Ergebnisse, dass das Vorhandensein von Risikokapital eine positive Auswirkung auf die Leistungsfähigkeit und das Wachstum eines Unternehmens hat. Ausgehend von dieser Besonderheit von Risikokapital und dem damit verbundenen faszinierenden Forschungsfeld widmet sich diese Dissertation der Frage, welche Rolle das Risikokapital im Rahmen von Neugründungen im akademischen Kontext spielt. Zu- dem untersucht diese Arbeit, welche Auswirkung eine Schwarmfinanzierung auf die Selektions- und Investitionsentscheidung von Risikokapitalgebern hat. Der Fokus hin- sichtlich der Investitionsentscheidung liegt dabei auf der Fragestellung, ob die Investi- tionsentscheidung eines Schwarmfinanzierungskollektivs die Entscheidung eines Risi- kokapitalinvestors beeinflusst und falls ein Effekt nachweisbar ist, inwieweit die Bil- dung eines Syndikats von Risikokapitalinvestoren durch das Vorhandensein einer Schwarmfinanzierungskampagne berührt wird. Aufbauend auf dieser grundlegenden Fragestellung untersucht diese Dissertation an- hand eines proprietären Datensatzes von 98 Ausgründungen aus dem akademischen Umfeld im Zeitraum 1997 bis 2012, sog. research-based spin-offs, welche Faktoren ei- nen wesentlichen Einfluss auf das Wachstum dieser Unternehmungen haben. Im Detail untersucht diese Dissertation dabei, ob risikokapitalfinanzierte akademische Ausgrün- dungen eine erhöhte Leistungsfähigkeit gegenüber nicht-risikokapitalfinanzierten aka- demischen Ausgründungen aufweisen und ob eine mögliche Leistungsdifferenz auf den Selektionsprozess des Risikokapitalgebers zurückzuführen oder bedingt durch seine ak- tive Teilnahme am Unternehmensgeschehen entstanden ist. Aufbauend auf der Res- sourcentheorie belegen die empirischen Ergebnisse dieses Forschungsbeitrages, dass ein homogener Bildungshintergrund des akademischen Gründerteams einen positiven Einfluss auf das Wachstum von akademischen Ausgründungen hat. Darüber hinaus zei- gen die Ergebnisse, dass Schulungsmaßnahmen der Forschungseinrichtung mit der Zielsetzung der Generierung von unternehmerischen Fähigkeiten und Netzwerken ei- nen ebenso positiven Einfluss auf das Wachstum haben. Die empirischen Analysen be- legen zudem, dass die Kommerzialisierung einer innovativen Technologie einen ebenso ix positiven Beitrag zum Wachstum der akademischen Ausgründung leistet. Das Vorhan- densein von Risikokapital wirkt sich ebenfalls positiv auf das Wachstum aus. So zeigen die Ergebnisse, dass akademische Ausgründungen mit Risikokapital deutlich schneller wachsen als vergleichbare akademische Ausgründungen ohne Risikokapital. Die Analy- sen lassen den Schluss zu, dass diese gesteigerte Leistungsfähigkeit eher dem aktiven Mitwirken der Investoren im Tagesgeschäft und nicht der Fähigkeit der Investoren bei der Auswahl der Unternehmung geschuldet ist. Über die Fragestellung der Rolle von Risikokapital bei akademischen Ausgründungen hinausgehend untersucht diese Dissertation ebenfalls, welche Rolle eine Schwarmfinan- zierung bei der Selektions- und Investitionsentscheidung bei Risikokapitalinvestoren hat. Dies ist dem Umstand geschuldet, dass die Wichtigkeit von Schwarmfinanzierun- gen in den vergangenen Jahren deutlich an Volumen und Wichtigkeit zugenommen hat. Im Detail untersucht diese Dissertation, ob und welche spezifischen Eigenschaften einer Schwarmfinanzierungskampagne einen Einfluss auf die Selektionsentscheidung eines Risikokapitalgebers haben. Die Untersuchung basiert auf einem proprietären Datensatz bestehend aus 66.000 Schwarmfinanzierungskampagnen auf der Kickstarter Plattform im Zeitraum 2009 bis 2016. Diese Datenbasis wurde mit der Crunchbase Firmendaten- bank mit ca. 100.000 Unternehmen kombiniert. Insgesamt konnten dadurch 267 Neu- gründungen mit mindestens einer Schwarmfinanzierungskampagne identifiziert wer- den. Aufbauend auf der Signaltheorie belegen die empirischen Ergebnisse, dass eine erfolgreich abgeschlossene Schwarmfinanzierungskampagne einen positiven Einfluss auf die Wahrscheinlichkeit einer Risikokapitalanschlussfinanzierung hat. Zweitens zei- gen die Ergebnisse, dass es einen inversen U-förmigen Zusammenhang zwischen dem Verhältnis aus Finanzierungsziel und tatsächlich eingeworbener Finanzierung und der Wahrscheinlichkeit einer Risikokapitalanschlussfinanzierung gibt. Drittens kann diese Dissertation empirisch belegen, dass eine Hervorhebung einer Schwarmfinanzierungs- kampagne auf der Kickstarter Plattform ebenfalls eine erhöhte Wahrscheinlichkeit nach sich zieht, Risikokapital zu erhalten. Viertens zeigen die Analysen einen ebenso signifi- kant positiven Zusammenhang zwischen der elektronischen Mundpropaganda auf Fa- cebook und der Wahrscheinlichkeit einer Anschlussfinanzierung durch Risikokapitalge- ber. x Hinsichtlich der Investitionsentscheidung eines Risikokapitalgebers ein Syndikat zu bil- den zeigen die Ergebnisse einen ebenso signifikanten wie negativen Zusammenhang zwischen dem Vorhandensein einer Schwarmfinanzierungskampagne und der Syndi- katsbildung. Zum einen bestätigen die Ergebnisse, dass sich sowohl die Wahrscheinlich- keit einer Syndikatsbildung als auch die Größe eines Syndikats reduziert, wenn das Investitionsobjekt eine Schwarmfinanzierungskampagne abgeschlossen hat. Gegeben der möglichen globalen Aufmerksamkeit einer Schwarmfinanzierungskampagne wei- sen die Ergebnisse zum anderen nach, dass die Wahrscheinlichkeit eines internationa- len Syndikats durch das Vorhandensein einer solchen Kampagne positiv beeinflusst wird. Ausgehend von diesen Ergebnissen kommt die Dissertation zu dem Schluss, dass sowohl das Selektions- als auch das Investitionsverhalten in Teilen durch die Entschei- dung eines großen Kollektivs aus Unterstützern von Schwarmfinanzierungskampagnen beeinflusst werden. Ausgehend davon schließt diese Dissertation mit der Erkenntnis, dass eine Schwarmfinanzierung nicht nur eine neue und wichtige Form der Unterneh- mensfinanzierung darstellt, sondern diese auch einen wesentlichen und nachhaltigen Effekt auf mögliche Folgefinanzierungsrunden durch Risikokapitalinvestoren hat. Diese Dissertation schließt mit einer Zusammenfassung der wichtigsten theoretischen wie praktischen Erkenntnisse. Im Kern beziehen sich die wesentlichen Beiträge dieser Dis- sertation darauf, dass die Ressourcentheorie mit Schwerpunkt auf Wachstumsfaktoren akademischer Ausgründungen um die Berücksichtigung von Wagniskapital erweitert wird. Zum anderen zeigt diese Arbeit, dass Crowdfunding die Informationsasymmetrien zwischen Investor und Unternehmen reduzieren kann und somit einen wichtigen Bei- trag zur Reduktion von Unsicherheiten im Investitionsprozess leistet. Diese Erkenntnis erweitert die Signaltheorie um einen weiteren wichtigen Baustein. xi Table of Contents Declaration of Authorship ..................................................................................... iii Abstract ................................................................................................................. iv Zusammenfassung ............................................................................................... vii Table of Contents .................................................................................................. xi List of Figures ...................................................................................................... xiii List of Tables ....................................................................................................... xiv List of Abbreviations ............................................................................................ xv 1 Introduction .................................................................................................... 1 1.1 Research Topic and Motivation ........................................................................ 1 1.2 Structure of the Dissertation ............................................................................. 8 2 Theoretical Background .................................................................................. 9 2.1 Literature Review on Entrepreneurial Finance.................................................. 9 2.2 Investment Selection, Information Asymmetries, and Quality Signals ............ 21 2.3 Development of Research Questions ............................................................... 24 2.3.1 VC Investments in Research-Based Spin-offs ........................................... 24 2.3.2 The Signaling Value of Crowdfunding and VC Investing ......................... 26 2.3.3 The Signaling Value of Crowdfunding and VC Syndication ..................... 28 3 Research-based Spin-offs and the Role of VC ............................................... 30 3.1 Literature Review on Academic Entrepreneurship .......................................... 31 3.2 Overview of Research-based Spin-off’s Resources and Hypotheses ................. 33 3.2.1 Human Capital ........................................................................................ 34 3.2.2 Social Capital .......................................................................................... 36 3.2.3 Financial Capital ..................................................................................... 37 3.2.4 Technological Capital .............................................................................. 39 3.3 Overview of VC Investing in Research-based Spin-offs ................................... 41 3.4 Data and Research Methodology .................................................................... 43 3.4.1 Dataset and Descriptive Statistics ............................................................ 43 3.4.2 Variables and Methods ............................................................................ 48 3.5 Empirical Results and Discussion .................................................................... 54 3.5.1 Results Concerning Growth Factors of Research-based Spin-offs ............. 55 3.5.2 Results Concerning the Role of VC .......................................................... 60 xii 3.5.3 Discussion of the Empirical Results ......................................................... 65 3.6 Limitations and Further Research Concerning Research-based Spin-offs ........ 72 3.7 Conclusion and Contribution Concerning Research-based Spin-offs ............... 73 4 The Signaling Value of Crowdfunding in a VC Context ................................ 76 4.1 Literature Review on Crowdfunding and VC .................................................. 77 4.1.1 Signaling Theory and Classical Signals in VC Investing ........................... 77 4.1.2 Signaling in Crowdfunding and Hypotheses ............................................ 79 4.2 Data and Research Methodology .................................................................... 91 4.2.1 Dataset and Descriptive Statistics ............................................................ 91 4.2.2 Variables and Methods Concerning VC Investing .................................... 96 4.2.3 Variables and Methods Concerning VC Syndication ................................ 99 4.3 Empirical Results and Discussion .................................................................. 101 4.3.1 Results Concerning Crowdfunding and VC Investing ............................. 101 4.3.2 Results Concerning Crowdfunding and VC Syndication ........................ 111 4.4 Limitations and Further Research Concerning Crowdfunding and VC .......... 119 4.5 Conclusion and Contribution Concerning Crowdfunding and VC ................. 120 5 Overall Conclusion and Contribution ......................................................... 125 5.1 Theoretical Contribution .............................................................................. 125 5.2 Practical Contribution .................................................................................. 127 6 References ................................................................................................... 130 xiii List of Figures Figure 1: Founder Ratio and Number of Absolute Founders in Germany .................... 6 Figure 2: Dimensions of Entrepreneurial Finance ...................................................... 10 Figure 3: Structure of a VC Fund............................................................................... 15 Figure 4: History of Research-based Spin-off Creation .............................................. 44 Figure 5: Distribution of FhG and VC Equity Involvements in RBSOs ........................ 46 Figure 6: Business Model Distribution amongst RBSOs ............................................. 47 Figure 7: Industry Overview According to the SIC Industry Classification ................. 94 Figure 8: Curvilinear Effect on VC Follow-up Funding ............................................ 104 xiv List of Tables Table 1: Industry Overview of VC-backed and non-VC-backed RBSOs ...................... 47 Table 2: Definition of Variables ................................................................................. 50 Table 3: Determinants of RBSO Growth (employees) ............................................... 58 Table 4: Determinants of RBSO Growth (employees) incl. VC Equity Investments .... 59 Table 5: Determinants of RBSO Growth (revenues) .................................................. 62 Table 6: Determinants of RBSO Growth (revenues) incl. VC Equity Investments ...... 63 Table 7: Overview of Hypotheses Regarding RBSO Growth ...................................... 66 Table 8: Category Overview of Crowdfunding Campaigns 2010 through 2015 ......... 92 Table 9: Industry Overview of New Ventures ............................................................ 95 Table 10: Summary Statistics of Crowdfunding Campaigns .................................... 102 Table 11: Determinants of VC Funding - All Categories (Firthlogit) ........................ 107 Table 12: Determinants of VC Funding - Reduced Categories (Firthlogit) ............... 108 Table 13: Determinants of VC Funding - All Categories (Logit) ............................... 109 Table 14: Determinants of VC Funding - Reduced Categories (Logit) ..................... 110 Table 15: Correlation Table of Independent and Control Variables ......................... 111 Table 16: Summary Statistics of Crowdfunding Campaigns 2010 through 2015 ..... 112 Table 17: Determinants of the Syndication Behavior of Venture Capitalists ............ 115 Table 18: Determinants of a VC Syndicate’s Level of Experience (1/2) ................... 116 Table 19: Determinants of a VC Syndicate’s Level of Experience (2/2) ................... 117 Table 20: Determinants of International Syndication of Venture Capitalists ........... 118 xv List of Abbreviations % Percent abs Absolute b Beta Factor B2B Business to Business BIC Bayesian Information Criterion BMWi German Federal Ministry for Economic Affairs and Energy (Bundesministeriums für Wirtschaft und Energie) BVC Bank-affiliated Venture Capital CAGR Compound Average Annual Growth Rate CF Control Function CVC Corporate Venture Capital e.g. For Example e.V. Eingetragener Verein EU European Union eWOM Electronic Word-of-Mouth EXIST EXIST is a support program of the German Federal Ministry for Economic Affairs and Energy (BMWi) FhG Fraunhofer Gesellschaft GDP Gross Domestic Product GEM Global Entrepreneurship Monitor GVC Government Venture Capital i.e. Id Est IL Log Liklihood IPO Initial Public Offering IT Information Technology IV Instrumental Variables IVC Individual Venture Capital xvi JOBS Jumpstart Our Business Startups Act KfW Kreditanstalt für Wiederaufbau m Million MINT Mathematics, Informatics, Natural sciences, and Technology nbreg Negative Binominal Regression NTBF New Technology-based Firm OECD Organization for Economic Co-operation and Development OLS Ordinary Least Squares p Significance Level RBSO Research-based Spin-off SD Standard Deviation SE Standard Error SIC Standard Industry Classification Codes TEA Total Entrepreneurship Activity TTO Technology Transfer Office USA United States of America USD United States Dollar USF University-oriented Seed Funds VC Venture Capital VIF Variance Inflation Factor w/ With w/o Without WOM Word-of-Mouth 1 1 Introduction 1.1 Research Topic and Motivation The importance of entrepreneurship has increased tremendously given the fact that its contributions to market economies are considered indispensable in an environment as dynamic as the 21st century. Ever since the early days of Schumpeter (Schumpeter, 1934), entrepreneurs are considered agents of creative destruction “who introduce change to the economic landscape by constantly undermining and challenging estab- lished industry incumbents” (Acs, Autio, & Szerb, 2014, p. 1). Thus, the entrepreneur can be considered as catalyst or missing link between economic integration and growth (Alhorr, Moore, & Payne, 2008). Given the particular importance of entrepreneurial activities for both the economic and societal well-being, a large array of benefits such as innovation (Acs & Audretsch, 1988; Kuratko, 2005), job creation (Blanchflower, 2000; Parker, 2009), or productivity increases (van Praag & Versloot, 2007) have been attributed to originate from entrepreneurial activities. However, the relationship be- tween the technological process, innovation, and growth appears to have changed par- ticularly in the 1990s as a result of the emergence of new and unprecedented techno- logical opportunities that heavily rely on the introduction of the personal computer (and similar digital peripheral products), as well as the ever-increasing availability of the internet. As a consequence, innovation has become more market-driven, more rapid and intense, and more closely linked to scientific progress (OECD, 2000). An example for the changing landscape is provided by technologies such as the telephone or the radio which took about 75 and 38 years respectively to reach its first 50 million users. Instagram, a social media platform, on the other hand achieved twice the amount of active users and needed only 28 months (TechCrunch, 2017). However, the terms entrepreneur and entrepreneurial activity are applied to a variety of contexts and are used synonymously for many activities that involve the engagement of one or more individuals, organizations, or activities (Acs et al., 2014). As Lumpkin and Dess (1996) point out, the concept of entrepreneurship evolves from various com- binations of individual, organizational, and environmental factors. Hence, entrepre- neurship can be defined as an activity that circumscribes a type of self-employment and/or new venture creation (Reynolds et al., 2005). Another dimension includes the cognitive attribute of one or more individuals in recognizing new and unprecedented 2 opportunities (Shane & Venkataraman, 2000). Given these dimensions and following Shane (2003), entrepreneurship can be considered an activity that involves the discov- ery, evaluation, and exploitation of opportunities in order to introduce new goods and/or services as well as ways of organizing through processes that previously had not existed or were not available to the individual. Within the large array of activities that lead to, or benefits that result from entrepre- neurial efforts, new entry is an essential part of the entrepreneurship activity and hence the central idea that underlies this concept. In other words, once the individual has discovered and evaluated a new opportunity, exploitation of the same is realized through entering a new or established market with a new or existing product or service (Lumpkin & Dess, 1996). The vehicle used through which the act of new entry is per- formed is an entrepreneurial entity in the form of a new venture, an existing firm or via internal corporate venturing (Burgelman, 1983). Given the focus of this dissertation on entrepreneurship rather than intrapreneurship, the formation of a new venture is thus at the heart of the entrepreneurial activity considered in remainder of this thesis, while the formation process itself is heavily influenced by a variety of parameters. As Gartner (1985) highlights, “the creation of a new venture is a multidimensional phenomenon; each variable describes only a single dimension of the phenomenon and cannot be taken alone. […] entrepreneurs and their firms vary widely; the actions they take or do not take and the environments they operate in and respond to are equally diverse and all these elements form complex and unique combinations in the creation of each new venture” (Gartner, 1985, p. 697). Combining the many definitions and dimensions just outlined, this dissertation refers to a new entrepreneurial entity as an independent and newly created legal entity founded by one or more entrepreneur(s) focusing on exploiting a newly identified com- mercial opportunity through the sale of a physical product or service while simultane- ously aspiring survival and particularly growth. Given this definition, it has to be acknowledged that not all new firm foundations are referred to with this dissertation. For example, newly created entities that do not focus on growth are not considered. These firms are often referred to as lifestyle entities (i.e. a yoga boutique or a restau- rant) and do not necessarily follow the idea of opportunity exploitation and growth. Further, company foundations that emerge from situations of unemployment are also 3 not considered. Lastly, partnerships such as tax, law, or doctoral offices are also beyond the scope of this dissertation. This exclusion restriction rests on two primary assump- tions. On the one hand, the exclusive focus on new ventures with substantial growth entities is justified with the above-mentioned economic and societal advantages these firms offer. On the other hand, the restrictive focus is also necessary to interpret the findings of this dissertation in the context of the broader entrepreneurial finance liter- ature elaborated on in more detail in the following section and which shares a similar focus (Achleitner & Braun, 2014). Following the more detailed characterization of a new venture given the exclusion re- strictions outlined, and considering the imperative importance of entrepreneurial enti- ties for the technological progress and economic growth as outlined above, an increas- ing effort towards understanding the antecedents and consequences of entrepreneurial activities is observable when viewing the ever-increasing number of both theoretical and practical research contributions devoting their attention towards entrepreneurship. At the heart of the literature devoted to new venture creation are research contributions explaining the prerequisites and antecedents of entrepreneurial intentions that lead to new venture creation (e.g. Ajzen 1991; Aldridge and Audretsch 2011; and Parker 2009), as well as contributions that elucidate the requirements for survival and growth (e.g. Clarysse, Wright, and van de Velde 2011; Hayter 2016; and Santarelli and Hien Thu Tran 2013). This trend of understanding the concept of entrepreneurship from a pure research perspective is accompanied by multiple efforts that align the interests of the so called quadruple helix, a collaborative view including academia, the business sector, policy makers, and the civil society (GEM, 2017). In that regard, one perspective combines the views from both policy makers and universities who address the topic of entrepreneurship from various angles. For example, the introduction of government funding schemes in Germany (i.e. EXIST)1 represent only a fraction of supportive means that have the intention to actively encourage and foster the creation of entrepreneurial activities and ultimately new venture creation (Federal Ministry for Economic Affairs 1 EXIST is a program supported by the German Federal Ministry for Economic Affairs and Energy (BMWi) and aims at encouraging technology transfer activities from re- search institutions and universities to the private sector by commercializing new prod- ucts and services. According to the BMWi (2017), the program supports students, grad- uates and scientists both with monetary and non-monetary aid. 4 and Energy, 2017). A further result of a more collaborative approach between policy makers and academia is the fact that universities nowadays complement their tradi- tional activities of teaching and research with supporting schemes and newly developed curricula that address the topic of entrepreneurship both theoretically and practically (Munari, Pasquini, & Toschi, 2015). This approach translates for instance into new study courses offering a specialization or complete degrees in entrepreneurship. In ad- dition, public and private research organizations as well as universities established so called technology transfer offices (TTOs), training programs, and other practically-ori- ented support schemes that are intended to smoothen and accelerate the process from research discovery to technology commercialization (Colombo, Mustar, & Wright, 2010). Further, the changing landscape of required skills and knowledge from the busi- nesses’ perspective is another critical viewpoint that is addressed when referring to the quadruple helix model. In particular, the mismatch of an increasing demand for math, science and IT-education and the currently available curricula is critical in order to al- low young people to identify and exploit unprecedented opportunities. Lastly, the view- point of the civil society highlights for example the constantly low number of female entrepreneurs and encourages a higher participation rate of females in the entrepre- neurship process (GEM, 2017). Hence, the collaborative perspective of the quadruple helix with the various stakeholders clearly allows to view the specific demands and supplies of skills and capabilities not in isolation but rather on a much broader and also more complex scale. Yet, and despite the ever increasing amount of both theoretical and practical knowledge that explain the development and growth of new ventures as well as incentives from the various stakeholders involved that actively encourage the creation of new ventures and support their survival and growth, the concept of new venture creation is far from being understood. This is exacerbated when referring to the total entrepreneurship ac- tivity (TEA). Whilst innovation-driven economies such as the United States of America (USA), Australia, Estonia, and Canada have a relatively high proportion of the 16 to 64 year-old adult population who are in the process of having founded (nascent entrepre- neurs) or currently founding a new business (new business owners) in the years 2016/2017, other nations lack far behind. Thereof, particularly the leading and pre- sumably strongest economies in the European Union (EU), notably Italy, Germany, Spain, and France, show the lowest number of entrepreneurship activity amongst all 5 innovation-driven economies globally (GEM, 2017). This outcome is especially relevant given that these countries, notably Germany, contributed largely towards the growth of the common market within the EU. However, when considering the changing techno- logical landscape in terms of innovation processes as mentioned before, it is only a matter of time until the competitive advantages developed during the past are fully exploited and other, likely new, market participants from countries outside the EU be- come large industry incumbents and replace the current market leaders. This viewpoint is particularly important for the German economy as it is often referred to be the engine of European growth and leading in many industries. Hence, combining the low level of the total entrepreneurship activity with the importance of a sustainable development of the German economy in the future, the prospects are far from optimal. In that regard, figure 1 summarizes the absolute number of founders in Germany and also shows the founder ratio in comparison to the total population in the same period. Regarding the development of both indicators from the beginning of the 21st century to the recent past, a negative trend is indistinguishable. In particular, the trend shows that initiatives that are intended to foster entrepreneurship and growth are offset by a flour- ishing German economy paired with a strong demand for corporate employees (KfW, 2017c). Exceptions are periods after financial crisis, notably in the years after 2001, 2008/2009, and 2013. These years are characterized by market turmoil. Based on the countercyclical dynamics of new venture creation and economic downturns, both the founder ratio as well as the absolute number of entrepreneurs increased in the post- crisis period as a result of new opportunities that emerged - or simply as a result of a decreasing need for corporate employment. However, when considering the recent years of strong economic growth, the latest research evidence on causes and conse- quences of entrepreneurial activities, and the fact that public and private supporting schemes are well developed and available in a variety of forms, the ratio of founders relative to the total population as well as the absolute number of founders has reached its lowest level in the year 2016. This trend demonstrates an undeniable fact that the concept of entrepreneurship is far from being understood and that the above-mentioned advantages of economic- and societal well-being are at risk. As this dissertation devel- ops a considerable contribution suited to entrepreneurial activities in a German context, and also provides new empirical insights relevant for German entrepreneurs as well as investors, the particular focus on Germany is justified. 6 Figure 1: Founder Ratio and Number of Absolute Founders in Germany The figure shows the trend of the absolute number of founders (in thousands) as well as the ratio of founders in relation to the total population (in percent) in Germany in the years 2000 through 2016 (KfW, 2017a; KfW, 2017b). Given this unsatisfactory trend regarding the decreasing number of entrepreneurs while referring to the ever-increasing amount of research contributions that explain anteced- ents and consequences of entrepreneurship, aspects that address requirements for sur- vival and growth are often named simultaneously with one decisive resource important for the well-being of new ventures - financial capital. Put differently, in order to exploit the identified opportunity, a new venture requires financial capital in order to start business operations (Binks & Ennew, 1996; Cassar, 2004; Ebben & Johnson, 2006). Based on this central importance of financial capital, this dissertation focuses on the financing of new ventures as it is one of the crucial issues entrepreneurs face when forming a new venture. Furthermore, the focus on the financing of new ventures is insofar important given that the financing decision made at the beginning has a lasting imprint on the development of the new venture in the future (Berger & Udell, 1998; Cassar, 2004). Thus, from a practical point of view, understanding the financing deci- sions of new ventures is an important prerequisite regarding the new venture’s devel- opment in terms of survival and growth. The latter is particularly relevant for the benefit for both the economy and society given that the advantages in terms of innovation, job creation, and societal well-being heavily depend on the success of the new venture as 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 0. 1. 2. 3. 4. A b so lu te n o . o f fo u n d d e rs ( in t h o u sa n d s) F o u n d e r ra ti o i n p e rc e n t Year FOU N DE R RA T I O A N D N U M BER OF A B SOLUTE FOU N DE RS I N G E RM ANY // 2000 -2016 No. of founders (in thousands) Founder ratio in % 7 outlined before. Additionally, from a theoretical point of view, the financing issue of new ventures is a major topic in the entrepreneurial finance research given that the causes and consequences of new venture financing are not well understood (Colombo & Murtinu, 2017; Denis, 2004). In other words, this dissertation explores the role of the financing of new ventures and develops new empirical insights from both a theo- retical and practical perspective. In particular, a specific form of entrepreneurial finance is devoted special attention to - venture capital (VC). Thereby, this dissertation focusses on understanding the role of venture capital in regard to growth issues of new ventures within an academic context drawing on the resource-based view of the firm (Barney, 1991; Barney, Wright, & Ketchen, 2001; Penrose, 1996; Wernerfelt, 1984). Further, this dissertation also evaluates how new means of entrepreneurial finance such as crowdfunding influence the selection of new ventures by venture capitalists. Lastly, this dissertation elaborates on the question if and how crowdfunding influences the syndi- cation behavior of venture capitalists. The latter research focus on crowdfunding draws on the theory of information asymmetries (Jensen & Meckling, 1976) as well as signal- ing theory (Busenitz, Fiet, & Moesel, 2005; Spence, 1973, 2002) and thereby provides novel insights to the microfinance and VC literature. Given the general research topic and motivation in providing an advancement of the theoretical frameworks just mentioned, as well as developing novel practical implica- tions against the background of new venture creation and VC financing, the core re- search focus of this dissertation is devoted to understanding if and how venture capital influences the growth of new ventures in an academic context as well as if and how crowdfunding as a new means of entrepreneurial finance affects the investment behav- ior of VC investors. Following this research question, this dissertation sheds light on the relevance of financing towards the survival and growth of new ventures in order to provide new insights that positively contribute to understanding the financing issues of new ventures. Ultimately, these findings shall support, both theoretically and practi- cally, investors and entrepreneurs alike in their decision-making regarding the financ- ing of new ventures in order to foster survival and growth, and ultimately ensure that the economic and societal benefits associated with entrepreneurial activities are less at risk. 8 1.2 Structure of the Dissertation Based on the theoretical and practical contribution this dissertation aims to develop, the structure is set up as follows. Section 2 gives a detailed literature overview about means of entrepreneurial finance while focusing on the context of new ventures, ven- ture capital, and crowdfunding. Further, the section also elaborates on the theoretical reasoning of the investment decision of venture capitalists against the background of signals of quality. Given the literature overview presented, this dissertation continues with developing three research questions that build the foundation of this thesis in sec- tion 2. In section 3, the role of venture capital towards the growth of research-based spin-offs is elucidated in greater detail. The section starts with summarizing the theoretical and empirical findings that address the growth of new ventures that have emerged from an academic environment and discusses how various resources are, both theoretically and practically, related to growth. Further, the venture capitalist’s role as coach or scout is discussed. Afterwards, the data and methodology are introduced as well as the empiri- cal results presented and discussed. The section concludes with a summary of limita- tions and suggestions for further research on growth issues in the context of academic entrepreneurship. Thereafter crowdfunding as a new form of entrepreneurial finance is devoted special attention to. In that regard, section 4 discusses the signaling value of crowdfunding in the venture capital investment context. The section addresses the value of crowdfund- ing campaign related signals towards the receipt of post-campaign venture capital fund- ing. Further, the signaling value of a crowdfunding campaign itself is evaluated and analyzed against the background of the syndication behavior of venture capitalists. Fol- lowing an extensive summary of the latest theoretical and empirical findings on VC selection and VC syndication, the data and methodology is introduced. Furthermore, section 4 presents the empirical results derived as well as discusses the findings in a greater context. Finally, section 4 concludes with the limitations of the findings and highlights avenues for further research in the area of the VC selection and syndication process while considering the ever-increasing importance of crowdfunding as a new means of entrepreneurial finance. Section 5 provides an overall conclusion and summa- rizes both theoretical and practical contributions of this dissertation. 9 2 Theoretical Background Based on the theoretical foundation developed in the following section, three research questions are derived which represent the core of this dissertation. First however, a literature overview about the means of entrepreneurial finance and the role of venture capital is given. Thereafter, the investment process of venture capitalists in the context of new ventures is analyzed against the background of the theory of information asym- metries with particular attention devoted to signaling theory. Further, crowdfunding as a new means of entrepreneurial finance is introduced. Based on these theoretical foundations, the respective research questions are derived. More precisely, the last section will elaborate on the role of a venture capital involve- ment in the growth of new ventures that have risen from an academic context. Second, a new form of entrepreneurial finance, i.e. crowdfunding, is considered and its signaling value is analyzed against the background of the allocation of post-crowdfunding ven- ture capital financing. Third, the role of a crowdfunding campaign is evaluated regard- ing the syndication behavior of venture capital investors. 2.1 Literature Review on Entrepreneurial Finance The development and growth of new ventures is subject to an array of factors, yet access to capital is key to the survival and growth of these firms (Binks & Ennew, 1996; Ebben & Johnson, 2006). Although means of entrepreneurial finance exist in a variety of forms, the sourcing of capital is nevertheless amongst the most challenging tasks an entrepreneur is confronted with when financing a new venture (Carter, Shaw, Wilson, & Lam, 2006; Neeley & van Auken, 2010). In general, entrepreneurial finance research covers the financing issues of all entrepre- neurial entities that are not publicly listed and that have growth ambitions. Thus, en- trepreneurial finance research coverage is not limited to financing issues of new ven- tures only, but rather takes a much broader perspective (Achleitner & Braun, 2014). As a result, research on entrepreneurial finance considers a heterogeneous landscape of entrepreneurial entities with equally heterogeneous alternative ways of financing means. In order to classify the large array of both stakeholders and financial options available, Achleitner and Braun (2014) suggest analyzing the concept of entrepreneur- ial finance along two dimensions. The first dimension relates to the life cycle the firm 10 is currently situated in. The second dimension refers to the respective stakeholders in- volved. These two perspectives allow addressing the respective requirements of the in- volved parties while simultaneously paying attention to the specific financial circum- stances the entrepreneurial entity is confronted with. Following Achleitner and Braun (2014), figure 2 summarizes the two dimensions along which research on entrepre- neurial finance is concerned with and addresses the core issues of the respective stake- holders respectively. Figure 2: Dimensions of Entrepreneurial Finance The figure illustrates the two dimensions along which research on entrepreneurial finance is concerned with (Achleitner & Braun, 2014). Life cycle of the firm Early Stage Growth Later Stage Seed Start-up Expansion Bridge Buyout P e rs p e ct iv e A. Entrepreneur Entrepreneurial Finance (narrow definition) “How to receive the right sources of funding to finance the growth of my business?” B. Investor Venture Capital “How to successfully invest into start-ups?” Buyout “How to successfully invest in a buyout of a company?” C. Asset Manager Venture Capital and Buyout as an asset class “How to maximize returns as an asset manager in venture capital and buyout funds?” Within the first dimension, each life cycle is characterized by different financial needs as well as different sources of capital (Rossi, 2014). In the early stages of development, research commonly refers to the term new venture given that the entrepreneurial entity is not a legal entity (i.e. seed stage) or has just been legally created (i.e. start-up stage) (Achleitner & Braun, 2014). Hence, the early stage is characterized by new ventures that have no, or if at all, a very short history of existence. In addition, their product or service is still in its infancy (Grichnik, Brettel, Koropp, & Mauer, 2017). Further, follow- ing the opportunity recognition, market research is usually complete so that market entry (i.e. the commercialization of the opportunity identified) can be commenced. Once market entrance was successful, the growth phase describes the expansion of the business where the business model is scaled by entering new markets or developing 11 new products or services. For very successful entrepreneurial entities with a strong his- tory of growth, the later stage circumscribes their need for additional finance drawing on, for instance, initial public offerings (IPO), or financing strategies of the established entrepreneurial entity to buy back shares from investors in order to gain independence with the use of dedicated (leveraged) buyout funds (Achleitner & Braun, 2014). The second dimension addresses the perspective of the different stakeholders - the en- trepreneur, the investor, and the asset manager. When regarding the perspective of an entrepreneur, the core question, independent of the life cycle of the firm, deals with the question of how to receive the right means of financing to support the (further) growth of the new venture. In that regard, the majority of entrepreneurs typically draws on personal resources in combination with financial means from family, friends, and fools first (Kotha & George, 2012). This is, at least partially, owed to the pecking order the- ory, a theoretical concept that is found to be also applicable for new venture creation (e.g. Achleitner, Braun, and Kohn 2011 and Watson and Wilson 2002). In the context of financing new ventures, the pecking order theory describes that entrepreneurs typi- cally draw on internal resources with capital from family, friends, and fools first, and then choose external funding as the second preferred alternative given their unwilling- ness to give-up ownership and control of their new venture (Myers, 1984; Myers & Majluf, 1984). However, in case the new venture does not develop as intended and for instance ceases to exist, funds owed to family, friends, and fools are likely irrecoverable and the entrepreneur is both financially and morally indebted with his closer peers (Grichnik et al., 2017). Yet, and although entrepreneurs prefer internal over external financing, the financing of new ventures with exceptional growth ambitions but low levels of revenues and equally low levels of cash-flows is nevertheless challenging. In this context, bootstrapping circumscribes the ability of entrepreneurs to cover their fi- nancial needs by internally generated funds. Beyond the provision of capital by friends, family, and fools, Achleitner and Braun (2014) highlight for example the ability to gen- erate sufficient cash through revenues or simply through the provision of private sav- ings. However, the authors also argue that bootstrapping is rare and internally gener- ated funds are largely insufficient in the context of new ventures with exceptional growth ambitions and/or high-tech oriented business models. In this circumstance, in- ternally generated funds can hardly cover the financing demands during the first weeks of operation (Achleitner & Braun, 2014). In case internally generated funds are not 12 available or insufficient in quantity, debt or equity capital from external sources may serve as additional means of entrepreneurial capital (Berger & Udell, 1998). When considering both the high risk of failure and the missing track record of first-time entrepreneurs as well as the unavailability of assets that may serve as collateral how- ever, traditional debt financing provided by banks is unlikely an option for new ventures particularly in their seed and start-up stage of development (Jeng & Wells, 2000; Knockaert, Wright, Clarysse, & Lockett, 2010). A second alternative of debt-like financ- ing is the provision of public funding schemes supplied by governments or government- sponsored institutions as outlined in the introductory section of this dissertation. Ullrich (2011) argues that the main rationale for the provision of public funding is the belief of policy makers that the pure provision of capital can alleviate the financial constraints of new ventures and thus positively support the creation and growth of new entrepre- neurial entities. However, given that the landscape of public funding instruments is immense in quantity and largely heterogeneous in quality, a clear categorization is dif- ficult to achieve (Achleitner & Braun, 2014). Hence, an in-depth discussion of the large universe of public-funding schemes in the context of entrepreneurial finance would go beyond the scope of this dissertation. Given the inherent shortcoming of new ventures in regard to risk-mitigating collateral combined with the large importance of new ven- ture creation regarding the societal well-being and economic growth, this dissertation particularly focuses on the entrepreneur in the seed and start-up stages of development. Within the second dimension, the perspective of the investor is dealt with, too. At its core, the investor’s perspective deals with the question how a successful investment is identified. When considering the shortage of collateral and the high probability of new venture failure, a viable option is financing in the form of risk capital that may serve as a suitable alternative to internally generated funds for newly created ventures (Bertoni, Colombo, & Grilli, 2011; Croce, Marti, & Murtinu, 2013; Sapienza, 1992). This form of capital is particularly suited for innovative young firms with both, a high growth poten- tial but also great risk inherent to the business model (Engel & Keilbach, 2007). Yet, two basic types of investors are commonly referred to in the context of new venture financing - business angels and venture capitalists. Despite the fact that no regulatory definition exists in regard to business angels and venture capitalists (Amit, Brander, & 13 Zott, 1998), both terms are often used interchangeably, and hence the definition of either is rather blurry. Usually, the first type of investors, business angels, are individual investors who provide private equity capital to new ventures (Mason & Harrison, 1995). The business angel is typically a former executive of a large corporation or business owner having collected substantial experience that is, in combination with capital, invested in new ventures (Rosenbusch, Brinckmann, & Mueller, 2013; Sudek, 2006). Given their extensive expe- rience, business angels normally invest in the seed and start-up stages of the newly created venture as their knowledge offers the biggest leverage and the price (i.e. value of the new venture) is low suiting their financial abilities (Elitzur & Gavious, 2003; Maxwell, Jeffrey, & Lévesque, 2011). Further, the non-monetary support in the form of experience is particularly important in the early stages of development. Said differently, the business angel’s experience is positively related to new venture success (Brettel, 2004). However, business angels have a smaller financial scope compared to venture capitalists who invest larger financial resources of multiple lenders (Grichnik et al., 2017). In addition, due to the fact that business angels comprise a single investor, the available managerial expertise is limited to the entrepreneurial skills and capabilities of the same person or the network of business professionals this person has access to. Lastly, business angels frequently pursue non-economic objectives when supporting new ventures such as hedonistic and altruistic motives (Wright, 1998). As such, a business angel’s investment objective does not necessarily coincide with that of a venture capitalist, who can be considered the second type of risk capital investor suited for new ventures. Although the field of seed and start-up stage investments has traditionally been covered by business angels, the number of dedicated VC funds tar- geting new ventures is growing (Dimov, Shepherd, & Sutcliffe, 2007; Kim & Wagman, 2016). VC per se is a private equity financial intermediary, primarily suitable for firms being in the early and expansion stage and which do not only lack financial resources, but also managerial experience and a network of business professionals (Jeng & Wells, 2000). Based on definitions of prior literature, VC is characterized as an institutional (Bessler & Kurth, 2007), formal (Bruton, Chahine, & Filatotchev, 2009), and a profes- sional type of investment (da Silva Rosa, Velayuthen, & Walter, 2003; Gompers & Ler- 14 ner, 2001; Hellmann & Puri, 2000). Moreover, a venture capital investment is charac- terized with an active involvement in the new venture (Sahlman, 1990). Nowadays, forms of VC include corporate VC (CVC), bank-affiliated VC (BVC), governmental VC (GVC), and individual VC (IVC) (Bertoni, Colombo, & Quas, 2015). Hence, venture capitalists do either appear in the form of a corporate/government-backed investor or as an independent investment entity. In essence, CVC, BVC, and GVC are a subdivision of a larger non-financial corporation (e.g. Siemens Venture Capital (“Next47”), Google Ventures), financial corporation (e.g. CommerzVentures), or government institution (e.g. High-Tech Gründerfonds) investing in new ventures for financial and strategic reasons (Hopp, 2010; Keil, Maula, & Wilson, 2010). Individual venture capitalists on the contrary appear in the form of sole partnerships that rise capital from outside inves- tors in return for the promise of wealth appreciation for the funds invested. Hence, venture capitalists act as a financial intermediary by investing and managing funds pro- vided by large corporates or government institutions and third-party individuals such as pension funds and wealthy individuals. The objectives pursued with the investments are broad; risk diversification, capital appreciation and strategic investing are amongst the most important ones, however. Whereas corporate or government venture capital- ists are rather structured as a subdivision in an organizational chart, the organizational structure of a VC fund is different and thus outlined in figure 3. Following Geigenberger (1999), the investment vehicle (i.e. the VC fund) is formally managed by the fund’s management referred to as the general partners. During the inception phase of a new VC fund, the general partners collect capital from investors such as wealthy individuals, large corporations, or institutional investors such as family firms or pension funds. The capital providing individuals are referred to as limited part- ners. Once the capital collected corresponds to the planned size of the fund, the general partners then start to screen and select potential portfolio investments that coincide with the fund’s strategy that is defined when the capital is collected from the limited partners in a process called fundraising. Potential strategies might include a certain industry focus, a specific stage in the new venture’s life cycle or a certain valuation range of the portfolio firms at acquisition. Once the screening of potential portfolio firms is complete and the funds available are invested, the general partners commence to monitor the development of the investee firms. The holding period normally lasts between 3 to 14 years and is mainly characterized with an active engagement of the 15 general partners in terms of providing management support to the portfolio firm (Agarwal & Bayus, 2002; Cumming & Macintosh, 2001). The management support ven- ture capitalists provide in addition to their financial support is commonly referred to as ‘smart money’ and includes various supporting mechanisms. Exemplary mechanisms are the installation of accounting systems, searching for consultants or key executives, as well as giving strategic advice (Arque-Castells, 2012; Balboa, Marti, & Zieling, 2011; Davila, Foster, & Gupta, 2003; Sørensen, 2007). Overall, these measures are naturally intended to foster a new venture’s positive development and thus avoid the risk of bank- ruptcy. The general partners receive a certain percentage (i.e. usually 2 percent) of the fund’s volume for their supervisory role in order to cover the administrative expenses related to the management of the portfolio firms. During or at the end of the fund’s predefined lifetime, the portfolio firms are sold and the proceeds are returned to the limited partners. Any profit in the form of capital appreciation of the funds invested is shared between the general and limited partners and distributed according to the agree- ments defined at the fund’s initiation. Figure 3: Structure of a VC Fund The figure illustrates the basic structure of a VC fund and its stakeholders along the invest- ment process (Geigenberger, 1999). Investor Portfolio Firm Institutional Investors Management VC Fund Investment Return Exit Funding Managment Fee Return Selection Monitoring 16 Since the limited partners invest with the purpose of increasing their capital provided, the portfolio firms are meant to increase in value during the holding period as a result of accessing new markets and/or commercializing new products and services. Despite the important role of the new venture’s management team itself, venture capitalists are also held accountable for the superior firm performance, measured with multiple di- mensions of performance, of portfolio firms they invest in over those who did not re- ceive VC financing (Alperovych & Hubner, 2013; Bertoni et al., 2011; Croce et al., 2013; Engel, 2002; Zacharakis & Meyer, 1998). As such, venture capitalists “can identify firms with hidden value and provide them with the necessary financing” (Bertoni et al., 2011, p. 1028). However, empirical evidence is inconclusive so far whether this superior per- formance is the result of inherent firm characteristics prior to a VC engagement or ra- ther the result of VC-related post investment monitoring and coaching (e.g. Bertoni et al., 2011; Chemmanur, Krishnan, and Nandy 2011; and Croce et al. 2013). Thus, the prevailing question concerning VC investing is whether venture capitalists are scouting promising new ventures based on a reproducible manner that would also grow in the absence of VC (i.e. a selection effect), or if the superior performance of investee firms is attributable to the value adding services venture capitalists provide to the firms they have chosen to invest in (i.e. a treatment effect). In line with this question, empirical evidence towards the treatment and selection effect of VC investments is versatile. For example, Croce et al. (2013) investigated a total of 696 firms and testify that VC-backed firms’ productivity is not statistically different from that of non-VC-backed firms before their first round of financing. They state however, that productivity increases as a result of a VC involvement leaving them to believe that the investee firms’ performance is attributable to a treatment effect rather than a selec- tion effect. A similar conclusion is also supported by Balboa et al. (2011), Bertoni et al. (2011), and Colombo and Grilli (2010). They provide empirical evidence that the sales and employee growth of the firms investigated is the result of the involvement of VC. In line with those findings is the outcome of studies performed by Davila et al. (2003) and Engel (2002), however limited to an increase in employee growth and total factor productivity respectively that was deemed to be the result of a VC involvement. Further, Colombo and Murtinu (2017) investigate whether there is a performance difference of individual and corporate VC firms in terms of the portfolio firms’ performance. Using a 17 sample of 259 VC-backed firms, they argue that investee firms of both types of VC in- vestors increase their performance primarily in regard to their sales volume. The au- thors argue that this performance increase is the result of the involvement of either type of VC and not the result of a potential selection effect (Colombo & Murtinu, 2017). On the contrary, Chemmanur et al. (2011) found in their study of 1,881 VC-backed and 185,882 non-VC-backed manufacturing firms that efficiency in both states, prior to and after a VC investment is higher for firms having received VC compared to those having not. This result clearly supports the hypothesis of the existence of a selection effect, too. However, they also find that growth in efficiency for VC-backed firms is higher com- pared to non-VC-backed firms. In this regard, venture capitalists apparently do select higher quality firms over others, allegedly being of lesser quality. Nonetheless, the value-addition provided by VC investments is not to be overlooked, thus supporting the existence of a treatment effect as well. Similarly, Di Guo and Kun Jiang (2013) compare the research & development and performance attributes of VC-backed over non-VC- backed firms in the case of China. Based on their analysis, both a higher performance of VC-backed over non-VC-backed firms is found in terms of financial as well as research & development performance prior to and after a VC investment. In addition, Baum and Silverman (2004) came to the same conclusion in their study on 204 new ventures in the biotechnology sector justifying the existence of both a treatment as well as a selec- tion effect in VC financing. Noteworthy is the fact that all authors have used unequal samples in terms of size, industry allocation, time, and geographical area. This supports the indication that both, a treatment and/or selection effect could be determined over and beyond one random sample size, thus supporting the existence of an external va- lidity of the hypothesis regarding the venture capitalists value-add claimed. Given the importance of this yet not thoroughly researched question however, a sizable part of this dissertation evaluates the role of a VC involvement in new ventures, too. Irrespective of a potential treatment or selection effect that can be considered respon- sible for the superior performance of new ventures backed by VC over new ventures without VC, the VC fund is obliged to provide the return to its investors. Hence, those portfolio firms that have survived and grown during the time the fund was invested (i.e. 3 to 14 years), are sold to other financial institutions or corporations, or taken public via an IPO. This process of divestment is commonly referred to as “exit” (Grichnik et 18 al., 2017) and the funds collected are redistributed to the investors. During the time the fund is invested in the portfolio firms, the management of the fund is compensated for its non-monetary support by a so-called management fee, a flat percentage fee usually in the range of 2 percent of the fund’s volume. In addition, the VC fund also receives part of the value increase of the investee firms from the time they are included in the fund until the exit. The actual percentage of the so called carried interest is subject to negotiation during the fundraising with the limited partners, has on average been around 20 percent of the capital gain generated. A third type of investor considered within the second dimension is the buyout investor. In contrast to a VC fund, buyout funds primarily leverage the purchase of an established firm with the use of a high amount of debt capital, however. As a result of the debt financing instrument, the subject firm is required to have substantial cash flow in order to be able to return both principal and interest to the capital provider - a criterion that VC investors do not necessarily demand from new ventures (Rosenbusch et al., 2013). Another difference with regard to VC is that buyout funds normally assume control of the investee without assuming an active role in the firm (Sahlman, 1990). Despite the tremendous importance of business angels in the context of new venture financing and the importance of buyout funds for established firms, this dissertation will focus exclu- sively on venture capital funds and combine the perspective of the VC investor with the perspective of the entrepreneur seeking funding for a newly created venture in the seed and start-up stage of development. This viewpoint is of particular importance given the fact that the role of a VC investment in new ventures is not well understood (Baum & Silverman, 2004), and also in line with prior literature focusing on the perspective of both the entrepreneur and the investor in the early stages of a new venture’s develop- ment (Bruton, Filatotchev, Chahine, & Wright, 2009; Gompers, 1999). A fourth type of investor, however not considered by Achleitner and Braun (2014), is the individual investor characterized as a so-called “backer” in the context of crowd- funding. This individual investor, e.g. the average person, has only recently been given access to investing opportunities in new ventures based on the sudden but notable in- troduction of various forms of crowdfunding platforms. At its core, crowdfunding rep- resents a relatively new means of funding that individuals and new ventures alike col- lect in the form of small amounts from a large group of individuals through the use of 19 online platforms acting as intermediaries (Agrawal, Catalini, & Goldfarb, 2013; Ahlers, Cumming, Günther, & Schweizer, 2015; Bruton, Khavul, Siegel, & Wright, 2015; Chola- kova & Clarysse, 2015; Mollick, 2014). The success of crowdfunding as a serious alter- native to the before-mentioned rather traditional forms of funding has particularly man- ifested after the financial crisis in the years 2008/2009. Ever since, the number of plat- forms, projects funded, and amounts invested have increased exponentially (Dushnit- sky, Guerini, Piva, & Rossi-Lamastra, 2016). This increasing trend translated into more than USD 16 billion of funding provided via crowdfunding across the globe in 2014 and is expected to increase to USD 34 billion in 2015 (Barnett, 2017). On average, the au- thor continues, the total investment volume provided by venture capitalists sums up to USD 30 billion per year. Hence, crowdfunding has established itself as a serious alter- native to the traditional means of financing such as venture capital. Today, various forms of crowdfunding exist, yet reward-based (e.g. Colombo, Franzoni, and Rossi-Lamastra 2015; Mollick 2014; Wessel, Thies, and Benlian 2015; and Wessel, Thies, and Benlian 2016), lending-based (e.g. Dushnitsky et al. 2016), and equity-based (e.g. Ahlers et al. 2015; Lukkarinen, Teich, Wallenius, and Wallenius 2016; Roma, Mes- seni Petruzzelli, and Perrone 2017; and Vismara 2016) crowdfunding campaigns have been subject to increased attention in the context of financing entrepreneurial initiatives lately. This is mainly owed to the fact that these forms of crowdfunding are simultane- ously seen as crowd-investing as the supporting process strictly requires a certain return in exchange for the financing provided. This prerequisite is clearly in contrast to dona- tion-based crowdfunding platforms that do not necessarily provide a material return in the form of interest (lending-based), capital appreciation (equity-based) or a product or service (donation-based). Donation-based platforms rather provide the opportunity for individuals to donate monetary support for the good cause by supporting, for in- stance, cultural projects (Dushnitsky et al., 2016; Mollick, 2014). Given this circum- stance, the latter form is not in line with the traditional entrepreneurial finance per- spective of new venture growth and shall therefore not be further considered. In contrast, the remaining forms of crowdfunding suit to the context of entrepreneurial finance research as the financing motive clearly prevails. Hence, the individual and non- professional (i.e. amateur) investor using equity-, lending, and reward-based crowd- 20 funding platforms shall therefore represent an augmented group of investors to be con- sidered within the discipline of entrepreneurial finance research. In particular, the re- ward-based model is the most popular form of crowdfunding amongst all forms (Dush- nitsky et al., 2016). In this form, individuals (i.e. backers) provide financial means in exchange for a product prototype or token-item gifts such as coffee-mugs, t-shirts or Facebook likes (Antonenko, Lee, & Kleinheksel, 2014; Xu, Zheng, Xu, & Wang, 2016). According to Dushnitsky et al. (2016), the second largest form are lending based plat- forms. The lending concept circumscribes that individuals can support new ventures financially by expecting a predefined return similar to interest on a government bond. Lastly, equity crowdfunding platforms most closely match the view and objectives of, for instance, business angels and venture capitalists in the second entrepreneurial fi- nance perspective. Using equity crowdfunding, individual investors can invest in new ventures directly in exchange for ownership or ownership-like equity instruments (shares, preferred shares, mezzanine capital). The latter form is however largely de- pendent on the legislative environment given that many countries nowadays have very strict investor protection laws and regulations (Vismara, 2016). As a result, pure equity crowdfunding platforms are rare and have only until recently gained importance. A reason for the increased importance are for example initiatives such as the Jumpstart Our Business Startups Act (JOBS) act in the United States that decreased investor pro- tection regulations and hence, opened new investment opportunities for amateur inves- tors (Roma et al., 2017). Despite the fact that equity and lending based platforms closely imitate the objectives of risk diversification and capital appreciation with new venture investing, these forms are nevertheless not available to a broad range of inves- tors given the many legal restrictions to protect small and amateur investors still in place. Hence, given that reward-based platforms are available to a broad range of indi- viduals and also mimic the entrepreneurial finance perspective in terms of growth as well as the investment objective of the individual investor in requiring a material return in exchange for his investment, this form is at the heart of this dissertation. The last perspective of the entrepreneurial finance perspective concerns the view of the asset manager in assessing an investment in terms of how the returns of the investment can be maximized (Achleitner & Braun, 2014). Given that this dissertation will focus on the allocation of investments in the early stages of a new venture, the perspective of 21 the asset manager is beyond the scope of this dissertation and shall hence not be dealt with. 2.2 Investment Selection, Information Asymmetries, and Quality Signals Referring to the above mentioned high risk of failure and the start-up nature of new ventures, information asymmetries play a crucial role between the investor and the in- vestee when investment proposals are evaluated. Due to the fact that the entrepreneur possesses private information that the investor may find valuable in the decision making process, the available information to the investor is limited (Moss, Neubaum, & Meyskens, 2015). Private information represents for example the technical feasibility of the product or the entrepreneur’s personal intent towards the venture’s development (Stiglitz, 1990). Put differently, this problem of information asymmetry, a concept ini- tially developed by Jensen and Meckling (1976) and formally known as the Principal- Agent theory, addresses in essence the availability of different amounts of information to the investor (i.e. the principal) and the investee (i.e. the agent) and the resulting implications this situation inherits. According to Amit et al. (1998), information asym- metries take the form of hidden information and hidden action. Hidden information is for instance related to the entrepreneur being more likely able to assess whether or not a newly developed technology will work as suggested. Hidden action on the contrary is based on the assumption that the new venture’s management team may pursue other objectives with the growth of the venture compared to the investor during the time when both parties are dependent on each other. In order to mitigate the investment risk ex-ante, a venture capitalist would usually go through multiple stages of venture screening in order to collect as much (private) in- formation as possible and to support the decision for or against an investment (Rosen- busch et al., 2013). This investigative process normally begins with an intensive due diligence, a process in which the new venture’s business plan and management team is intensively scrutinized (Fried & Hisrich, 1994; Zacharakis & Shepherd, 2001). Given the large array of information available, venture capitalists primarily focus on the en- trepreneurial team, the target market including the product or service as well the in- vestment risk that a new venture has compared to other available investment opportu- nities (Brettel, 2002; Petty & Gruber, 2011). Given the high number of new ventures seeking funding as well as the rigorous screening process of venture capitalists, about 22 90 percent of deals get rejected, and from the remaining ones, only a fraction receives the needed funding (Gompers & Lerner, 2004; Ferrary, 2010). Further, and with time being a scarce resource during a due diligence investigation process, Zacharakis and Meyer (1998) found that venture capitalists tend to face a negative correlation between fully comprehending the new venture as well as its products or services and the amount of information they receive. This finding is based on the assumption that the more in- formation a potential investor receives, the less clear und understandable the investee becomes. Kunze (1990) even argues that if venture capitalists tried to analyze every potential information related to the new venture, a VC would never be fully confident about investing the available funds. This coherence will allegedly lead to venture capi- talists judging the investment opportunity intuitively, resulting in decisions being made under the assumption of overconfidence (Gimmon & Levie, 2010; Zacharakis & Shep- herd, 2001). According to Griffin and Varey (1996), this overconfidence takes either the form of overestimating the likelihood of a desired outcome (i.e. optimistic overcon- fidence) or by simply overestimating one’s own knowledge during the decision-making process. Either way, the decision whether a new venture is worth investing leaves the area of a rational and reproducible decision-making rather aligned with gut feeling (Macmillan, Zemann, & Subbanarasimha, 1987). Another complementary evaluation process performed by venture capitalists in order to reduce information asymmetries is the provision of financial means in stages (i.e. ‘staging’). Given that new ventures are subject to reaching agreed milestones in order to receive agreed resources, venture cap- italists can withdraw their engagement as agreed milestones are not met and thus limit their investment risk (Dahiya & Ray, 2012; Gompers, 1995). Based on the intensive due diligence that precedes a VC investment, venture capitalists would evaluate seminal signals that portray the potential and superiority of the new venture above others in order to reduce informational asymmetries ex-ante (Moss et al., 2015; Vismara, 2016). Particularly in the early stages of a screening process, signals are an important means to reduce initial information asymmetries between the investor and the investee (Busenitz et al., 2005). Nevertheless, a venture capitalist is unable to fully judge and comprehend all aspects of the investee before acquiring an ownership stake and receiving access to the new venture’s internals. Although venture capitalists have means through which the risk of investment failure can be reduced as discussed above, it is in essence their experience and expert knowledge about the new ventures 23 they invest in which makes venture capitalists “better able to address information asym- metry problems than other financial firms” (Croce et al., 2013, p. 491). When early stage investments are screened, investors largely rely on signals that reduce information asymmetries und uncertainties about the future potential of the firm. In other words, decision makers such as venture capitalists often rely on informational cues in situations in which decisions have to be made in the absence of perfect information in order to assess what future outcomes to expect - the concept of signaling theory (Busenitz et al., 2005; Spence, 1973, 2002). Signaling theory describes efforts of the capital-seeking party (i.e. the entrepreneur) to reduce information asymmetries by providing infor- mation for the inherent quality and future development of a new venture to the capital- providing or assessing party (i.e. the venture capitalist). Hence, signaling theory cir- cumscribes that entrepreneurs signal the quality and viability of their venture to a ven- ture capitalist in order to stand out and suggest superior quality and ability compared to other capital-seeking ventures (Arthurs, Busenitz, Hoskisson, & Johnson, 2009; Buse- nitz et al., 2005; Connelly, Certo, Ireland, & Reutzel, 2011). In order to be valuable, “signals must be freely accessible (i.e., observable), understood in advance, and costly to imitate” (Hopp & Lukas, 2014, p. 638). Empirical evidence towards the value of different signals in the context of VC investing is versatile. For instance, venture capitalists focus on the investee firm’s apparent char- acteristics in terms of products and services, the potential of the target market, the firm’s financial potential, as well as the management teams’ set-up (Petty & Gruber, 2011). Most importantly however, Petty and Gruber (2011) conclude that a good management team with sufficient business experience pursuing a promising business idea might al- ready be valued as a good signal. Thus, human capital characteristics play an important role in VC decision making since human capital is also positively associated with venture growth (Baeyens, Vanacker, & Manigart, 2006; Knockaert et al., 2010; Zacharakis & Meyer, 2000). In essence, human capital refers to a set of skills, capabilities, and knowledge that individuals acquire during their formal education, on-the-job training, and job experience (Shrader & Siegel, 2007; Unger, Rauch, Frese, & Rosenbusch, 2011). Further, venture capitalists are in clear favor of product-oriented business models in- stead of service businesses that are fully dependent on their founding team (Munari & Toschi, 2011). The latter aspect is particularly relevant if the management team breaks up, or if the venture capitalist decides to replace the management team (Elitzur & 24 Gavious, 2003; Hellmann & Puri, 2002). Further, patents are commonly referred to have a strong and positive signaling value to outside investors (Conti, Thursby, & Rothaermel, 2013; Haeussler, Harhoff, & Mueller, 2014; Hoenig & Henkel, 2015). The value of patents is particularly relevant for new ventures since they allow the new ven- ture to exclusively exploit a new technology providing them a competitive advantage (Hsu & Ziedonis, 2013). Lastly, venture capitalists can reduce information asymmetries concerning a new venture by mainly investing in ventures that have already been eval- uated (i.e. undergone due diligence) by a preceding investor, such as business angels or other VC funds (Bertoni et al., 2011; Davila et al., 2003). This practice implies that prior investors had already assessed the new venture to be of high-quality what may reduce the perceived investment risk from a venture capitalist’s perspective (Bonardo, Paleari, & Vismara, 2010; Lerner, 1999, 2002). In particular for early stage firms, third party signaling may be of large importance given the lack of other informational cues to be assessed (Plummer, Allison, & Connelly, 2016). Although the task of signal evaluation is common practice, the scarcity and heteroge- neity of signals in the context of new ventures may impose the difficulty that individual investors assess signals differently. In essence, investments in new ventures are charac- terized with greater information asymmetries compared to later stages firms (Kirsch, Goldfarb, & Gera, 2009) and investors are confronted with less reliable, selected, and unregulated information (Plummer et al., 2016). Given the scarcity of reliable signals as well as the need to have the few signals available objectively assessed from multiple perspectives, this dissertation strives to provide empirical evidence how the selection process is influenced while considering crowdfunding as a new means of entrepreneur- ial finance attesting the quality of a new product or service. Further, this dissertation will elaborate in more detail on the investment process regarding new ventures in an academic spin-off context as well as the role of VC in the growth process of these firms. 2.3 Development of Research Questions 2.3.1 VC Investments in Research-Based Spin-offs In recent years, academic entrepreneurship has gained both momentum and the atten- tion from academics, governments, and researchers at the same time (Urbano & Guer- rero, 2013). An understanding of success factors of these important firms is essential in 25 order to develop policy measures that effectively support new venture creation from academics in terms of their survival and growth, and which foster technology transfer as well as the creation of jobs. These are firms founded by academics (i.e. current and prior researchers) who aim to fill the gap between scientific research and its commer- cialization by exploiting technological innovations in the form of marketable products or services (Colombo et al., 2010). Further, research-based spin-offs (RBSOs) are also very important regarding the transfer of knowledge from research organizations - both public and privately-sponsored - to the private sector (Czarnitzki, Rammer, & Toole, 2014; Festel, 2013; Fryges & Wright, 2014; Urbano & Guerrero, 2013; Wright, 2014). When considering the relatively few contributions that deal with the concept of aca- demic entrepreneurship, one can conclude that not much research has been dedicated to this fascinating niche of the overall entrepreneurial activities. However, understand- ing the peculiarities of RBSOs is nonetheless essential since these new ventures have very special characteristics that distinguish them from regular new ventures. Amongst them is for example a homogeneous founding team and radically new technologies which encompass the possibilities to transfer their technologies into commercial prod- ucts (Colombo & Piva, 2012). In addition, RBSOs often have large capital needs for the construction of prototypes and the frequently required testing facilities in the form of, for example, well-equipped laboratories. Given that the capital-intensive development and testing procedure cannot solely be covered by public funding or debt capital, and the fact that academic spin-offs often lack sufficient collateral, the available financing options are reduced notably (Jeng & Wells, 2000; Knockaert et al., 2010; Wright, Lock- ett, Clarysse, & Binks, 2006). However, an exception to the scarce landscape of financing options still available is VC. In other words, VC is often the remaining financing option for academic entrepreneurs who have already completed initial research or developed first prototypes (Bertoni et al., 2011; Croce et al., 2013; Sapienza, 1992). In addition to the provision of equity- capital, a VC involvement may additionally entail management support such as the in- stallation of accounting systems, searching for consultants or key executives, as well as giving strategic advice as previously mentioned (Arque-Castells, 2012; Balboa et al., 2011; Davila et al., 2003; Sørensen, 2007). As a result, acquiring VC can be a beneficial financing option for RBSOs when considering a) their resource-scarcity and b) their large capital need given the high-tech nature of their products and services. In line with 26 the generic advantages of VC, a large array of scientific research provides strong support that VC-backed firms outperform non-VC-backed firms (Alperovych & Hubner, 2013; Bertoni et al., 2011; Croce et al., 2013; Engel, 2002; Zacharakis & Meyer, 1998). How- ever, the various findings are inconclusive so far whether this superior performance is the result of the inherent characteristics of the venture prior to a VC engagement or rather the result of VC-related post investment monitoring and coaching once the ven- ture has become a portfolio firm (e.g. Bertoni et al. 2011; Chemmanur et al. 2011; and Croce et al. 2013). Against this background, the empirical contribution of this dissertation is twofold. First, new insights on the peculiarities of RBSO-specific resources and their association with firm performance are generated by contributing to advancing the resource-based view of the firm (Barney, 1991; Barney et al., 2001; Penrose, 1996; Wernerfelt, 1984). Fur- ther, this dissertation seeks to identify if VC-backed RBSOs outperform non-VC-backed RBSOs and if so, disentangle the effects of RBSOs’ growth by evaluating whether ven- ture capitalists contribute to growth by choosing the right investment objects (i.e. se- lection effect) or by providing additional resources (i.e. treatment effect). Given the intended research scope addressing the role of VC towards the growth of RBSOs, the first research question is formulated as follows: Research Question 1: What drives growth in research-based spin-offs and how is growth affected by VC? 2.3.2 The Signaling Value of Crowdfunding and VC Investing As a result of dried-up financial resources after the global financial crisis in the years 2008/2009, crowdfunding became a popular source of funding for cultural and com- mercial ventures (Antonenko et al., 2014; Bruton et al., 2015). As above-mentioned, crowdfunding represents a relatively new means of funding that allows the individual, i.e. backer, to support new ventures in the form of small amounts through online plat- forms that act as intermediaries (Agrawal et al., 2013; Ahlers et al., 2015; Bruton et al., 2015; Cholakova & Clarysse, 2015; Mollick, 2014). Given the increasing popularity amongst amateur investors and entrepreneurs alike, crowdfunding turned into a viable source of entrepreneurial finance for commercially-