Casey J. Frid

Low-wealth entrepreneurs and access to external financing

Purpose – The purpose of this paper is to explore the relationship between low-wealth business founders in the USA and external startup funding. Specifically, the authors test whether a founders’ low personal net worth is correlated with a lower probability of acquiring funding from outside sources during the business creation process. Design/methodology/approach – The authors use a double-hurdle Cragg model to jointly estimate: first, the decision to acquire external financing; and second, the amount received. The sample is the US-based Panel Study of Entrepreneurial Dynamics II (PSED II). The PSED II tracks business founders attempting to start ventures from 2005 to 2012. Findings – Receipt of outside financing during business formation is largely determined by the business founder’s personal finances (controlling for human capital, venture type and industry, and whether money was sought in the first place). A higher household net worth results in larger amounts of external funding received. Low-wealth ...

Financing the Emerging Firm: Comparisons between PSED I and PSED II

This chapter explores whether certain kinds of financing that are both expected and acquired by entrepreneurs during the venture startup process might have an influence on the likelihood that these efforts will lead to ongoing ventures. We look at whether entrepreneurs expect and utilize their own personal funds for business creation, as well as whether entrepreneurs expect and acquire funds from sources external to themselves. We offer a novel way of looking at external funding sources by dividing external funding into two categories: monitored and unmonitored.

Acquiring Financial Resources to Form New Ventures: The Impact of Personal Characteristics on Organizational Emergence

Conventional wisdom says that friends, family, and fools provide startup financing. Beyond this platitude, little evidence is available about who acquires precisely what sources of financing during the earliest stages of starting a venture. This study argues for a more nuanced view of the financing of emerging firms that extends prior research on large businesses and small- and medium-sized enterprises. Drawing on human capital and pecking order theory, this study finds that nascent entrepreneurs in the process of creating an organization follow paths of least resistance when acquiring financial resources, which differ according to the entrepreneurs race, as well as firm and industry characteristics.