Essays on Entrepreneurial Financing

Venture capital has emerged as an integral component within the entrepreneurial ecosystem. This dissertation seeks to understand how venture capital has influenced entrepreneurial activities in three different contexts concerning various sources of risk capital. The first study investigates how startups adjust their technological positioning after securing corporate venture capital, delineating a nuanced framework based on an interplay of learning synergies and competitive threats. The theory is tested in the mature context of European and North American IT industry and finds that startups’ technological positions tend to converge, diverge, or maintain distance from their corporate investors’ parent corporations, depending on the initial technological distance prior to receiving investments. The second study shifts its focus toward an emerging industry and explores the impact of venture capital on both industry dynamics and startups’ product positioning. The chapter relies on a uniquely compiled panel dataset of startups entering the nascent plant-based food and beverage industry, as well as their historical website data tracing the evolution of product framing within the industry. The empirical patterns reveal that venture capital interests elicit entry during the initial stage of industry emergence. However, a contrasting deterring effect is observed, when venture capital deals flow to existing portfolio companies through follow-on investments. Furthermore, venture capital supports startups in broadening the market appeal of the nascent niche market by navigating the complex institutional environment and strategically combining multiple institutional logics for product framing. The final study delves into the growing trend of investing in sustainability, and sets out to trace the influence originating from the source of venture capital. The chapter examines how limited partners with varying preferences for social impact wield their influence on shaping venture capital funds’ sustainability orientation. Findings from a large sample of venture capital funds and their investment history indicate that funds predominantly backed by limited partners with a higher willingness to pay for social impact include a greater number of sustainability-driven startups in their portfolio. Further, this effect is more pronounced in conventional funds (as opposed to impact funds); in funds located in countries with weak (instead of strong) norms toward sustainability performance; and in funds managed by first-time and young GPs. Through these studies, this dissertation aims to deepen our understanding of the multifaceted impact of venture capital.