Reducing Uncertainty for Technology Start-Ups

Abstract

We investigate the extent to which the signal and intrinsic value of a founder's endowments and relationships can reduce the uncertainty that a venture capital (VC) firm has for an academic startup and help the startup obtain VC funding to exploit a university-generated technology. Our study suggests that a founder's endowments of scientific publications, patents, relationships and stock of technological knowledge are positively related to a venture's ability to secure VC funding. The study also suggests that, beyond these endowments, there is something else about surrogate founders that allows their startups to be more likely to secure VC funding than their inventor counterparts.

Keywords: Capabilities life cycle (CLC), uncertainty reduction, signal and intrinsic value, surrogate founder, scientific publications, network and social ties, and venture capital financing