Cases of start‐up financing

Purpose This paper seeks to understand the dynamics of new venture financing across 20 business start‐ups. Design/methodology/approach A total of 20 cases were explored, via initial discussions with the founder(s), and follow‐up contact to confirm sources of financing acquired during new venture creation. This approach was adopted because of the challenges associated with acquiring full details of start‐up financing, and in particular informal forms of new venture financing. Findings Significant variation in, and scale of, new venture financing was identified. In multiple cases, funding patterns did not tally with established explanations of small business financing. Research limitations/implications The primary limitation of the analysis is the focus on a small number of individual cases. Although this allowed for more detailed analysis, it does not make the findings applicable across the small business population as a whole. New ventures acquired very different forms of finance, and in different configurations or “bundles”, so creating a wide range of start‐up financing patterns and overall levels of capitalisation. This suggests that multiple factors influence founder decisions on start‐up funding acquisition. It also indicates the wide divergence between highly capitalised and under‐capitalised start‐ups. Practical implications Many of the new ventures were started with low levels of capitalisation, which as the literature suggests is a strong determinant of reduced prospects for survival. This suggests a possible “financing deficit”, rather than gap, for a proportion of business start‐ups. Originality/value The paper provides an alternative methodology for considering new venture financing, and as a result concludes that standard, rational theories of small business financing may not always hold for new ventures.