51 Pages Posted: 16 May 2011 Last revised: 29 Oct 2015
Date Written: May 2011
We present a theoretical model of startup signaling with multiple signals and potential differences in external investor preferences. For a novel sample of technology incubator startups, we empirically examine the use of patents and founder, friends, and family (FFF) money as such signals, finding that they are jointly endogenous to venture capital and business angel investment in the startups. For this sample, venture capitalists appear to value patents more highly than FFF money, while the reverse is true for business angels. Moreover, the impact of patents on venture capitalists is larger than the impact of FFF money on business angels.
Suggested Citation: Suggested Citation
Conti, Annamaria and Thursby, Marie C. and Rothaermel, Frank T., Show Me the Right Stuff: Signals for High Tech Startups (May 2011). NBER Working Paper No. w17050. Available at SSRN: https://ssrn.com/abstract=1841287