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The Interaction between Product Market and Financing Strategy: The Role of Venture Capital

SSRN Electronic Journal
1999
  • 110
    Citations
  • 19,314
    Usage
  • 48
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    110
    • Citation Indexes
      110
  • Usage
    19,314
    • Abstract Views
      16,200
    • Downloads
      3,114
  • Captures
    48
    • Readers
      47
    • Exports-Saves
      1
      • SSRN
        1
  • Ratings
    • Download Rank
      8,091

Article Description

Venture capital is widely believed to be an influential arrangement for the financing of new innovative companies. We examine and find empirical evidence that venture capital financing is related to product market strategies and outcomes of startups. We use a unique hand-collected database of Silicon Valley high technology start-ups, that contains both venture capital and non-venture capital backed firms, and that contains firm-specific data on initial product market strategies, subsequent financing patterns, and the time it takes a firm to bring its product to market. We find that firms that are pursuing an innovator strategy are significantly more likely and faster to obtain venture capital. The presence of a venture capitalist is also associated with a significant reduction in the time taken to bring a product to market, especially for innovators. Further, firms are more likely to list obtaining venture capital as a significant milestone in the lifecycle of the company as compared to other financing events. Our results suggest significant interrelations between investor type and product market dimensions, and a potential role of venture capital for innovative companies.

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