Dissertation
Essays in entrepreneurial finance
University of Iowa
Doctor of Philosophy (PhD), University of Iowa
Summer 2022
DOI: 10.25820/etd.006641
Abstract
This dissertation focuses on strategies that entrepreneurs use to start and grow a startup. The first chapter studies the link between entrepreneurial programs and types of founders. Specifically, it studies the return for entrepreneurs who participated in accelerator programs that require founders to give up equity to participate in the program compared to founders that graduated from accelerators that do not require equity. The second chapter qualifies the textual structure of ICOs’ white papers using natural language processing (NLP) following a methodology introduced by Toubia et al., (2021). The chapter focuses on the relationship between speed, volume, and circuitousness and the success of ICOs.
In Chapter 1, I exploit data on startups that graduated from accelerators that are heterogeneous in equity design. I study the dilemma of going big or staying small that has been challenging entrepreneurs to wisely decide whether to trade equity in exchange for capital investment and have a more valuable equity share or retain a majority equity stake and look for noteworthy opportunities in later stages. The major heterogeneity among accelerators that I focus on is equity investment and early-stage seed funding. Using matched sample analysis, I provide evidence that although participating in an equity-investment accelerator has beneficial effects on the post-accelerator performance of portfolio companies to reach the next round of fundraising faster, they raise less capital in 12-month, 18-month, and 24-month time horizons after graduation in comparison to graduates of equity-free accelerators. In fact, I find that founders with more years of corporate experience and higher-quality business ideas tend to shorten the path to success by participating in equity-investment accelerators. On the other hand, consistent with Hallen et al. (2020) who believe that a learning mechanism is the primary cause of accelerator effects on venture development, I find that, while ventures are heterogeneous and they learn at different rates and different depths, some entrepreneurs have already learned what to do, and it is accelerator equity design and seed investment that negatively impacts acceleration and slows down venture growth.
Chapter 2 exploits the content of white papers that are published by Initial Coin Offering (ICO) campaigns. We study information exchanged between ICOs and investors via disclosed information in 2149 ICO white papers. We employ natural language processing (NLP) to quantify the structure of white papers and demonstrate their contribution to the success of ICOs. Following the content analysis procedure by Toubia et al. (2021), we elicit information from ICO textual sources by calculating three measures namely, speed, volume, and circuitousness. Our findings show that ICO projects with a well-written white paper that disclose risk and routinely return to previously discussed topics (i.e., circuitousness) are likely to raise more funds. Consistent with this, white papers that cover more ground (i.e., volume) contribute positively to the successful outcomes of ICO fundraising campaigns. In contrast, white papers that transit quickly between topics (i.e., speed) are less likely to have a positive impact.
Details
- Title: Subtitle
- Essays in entrepreneurial finance
- Creators
- Mahdi Eghbali
- Contributors
- Anne P. Villamil (Advisor)Luciano I. de Castro (Committee Member)Nicholas Yannelis (Committee Member)Olav Sorenson (Committee Member)Rabah Amir (Committee Member)
- Resource Type
- Dissertation
- Degree Awarded
- Doctor of Philosophy (PhD), University of Iowa
- Degree in
- Economics
- Date degree season
- Summer 2022
- DOI
- 10.25820/etd.006641
- Publisher
- University of Iowa
- Number of pages
- xii, 90 pages
- Copyright
- Copyright 2022 Mahdi Eghbali
- Language
- English
- Description illustrations
- illustrations, tables
- Description bibliographic
- Includes bibliographical references.
- Public Abstract (ETD)
Entrepreneurs are the key driver of innovation and economic growth. Despite its importance, surprisingly little is known about how entrepreneurs are valued in the economy, why some choose to trade equity in the early stage of their startups, while others rely on equity-free fundraisings, and the effects of entrepreneurial support programs.
Chapter 1 studies accelerator programs. Some accelerators are designed as equity-free programs with cash prizes, while some are for-profit and provide seed investment and access to resources in exchange for a relatively small equity stake. This difference among accelerators has an impact on their portfolio companies and is associated with different time horizons to reach different outcomes. I find that startup founders with more years of industry experience are more likely to participate in equity-investment accelerators and reach the next round of private fundraising faster compared to startups that graduate from equity-free accelerators.
Chapter 2 uses natural language processing (NLP) to quantify three main measures (i.e., speed, volume, and circuitousness) to illustrate how the content of white papers, documents that outline a venture’s blockchain technology, management team, and business potential for the investors, is linked to the success of Initial Coin Offerings (ICOs), measured by the amount of funds raised. We find that ICO projects with a well-written white paper that discloses risk and routinely returns to previously discussed topics are likely to raise more funds. At the same time, white papers that cover more ground contribute positively to successful outcomes of ICO campaigns, while white papers that transit quickly between topics are less likely to have a positive impact.
- Academic Unit
- Economics
- Record Identifier
- 9984285345802771
Metrics
1 File views/ downloads
30 Record Views