Signaling in the context of early-stage equity financing : review and directions

Svetek, Mojca (author)

Access to early-stage equity financing is vital to the growth of high-potential new ventures. To understand how entrepreneurs obtain external financing, researchers have studied the effectiveness of different signals that entrepreneurs send to investors. In this paper, we provide an overview of current research that uses signaling theory to study the likelihood and success of obtaining funding from angel investors and venture capitalists. The content analysis reveals that empirical research has well explored the signaling value of grants, prior investments, and the human and social capital of the firm to early-stage equity investors. However, we find that the literature on signaling effects on early-stage equity investors is fragmented and undertheorized. We note that while there has been an increase in the number of studies using signaling theory to explain success in obtaining early-stage equity financing, the theory remains underutilized, despite its suitability for this particular area of research. We describe the core ideas of signaling theory and how researchers have applied them in the context of venture capital and angel investing. We discuss how this stream of research can build on and extend signaling theory and highlight promising avenues for future research.

• Language: English
• Keywords: capital, investments, competitivity, signaling theory, venture capital, angel investment, equity financing, new-venture finance, entrepreneurship
• Work type: Article
• Typology: 1.01 - Original Scientific Article
• Organization: EF - School of Economics and Business
• Publication status: Published
• Publication version: Version of Record
• Year: 2022
• Number of pages: Str. 71-104
• Numbering: Vol. 24, no. 1
• PID: 20.500.12556/RUL-136535
• UDC: 658
• ISSN on article: 1369-1066
• DOI: 10.1080/13691066.2022.2063092
• COBISS.SI-ID: 106066179
• Publication date in RUL: 10.05.2022

Record is a part of a journal

• Title: Venture capital
• Shortened title: Ventur. cap.
• Publisher: Taylor & Francis
• ISSN: 1369-1066
• COBISS.SI-ID: 1096981

Licences

• License: CC BY-NC-ND 4.0, Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International
• Link: http://creativecommons.org/licenses/by-nc-nd/4.0/
• Description: The most restrictive Creative Commons license. This only allows people to download and share the work for no commercial gain and for no other purposes.

Secondary language

• Language: Slovenian
• Keywords: kapital, investicije, konkurenčnost