Financing Structure, the COVID-19 Shock, and Startup Survival: Evidence from a Peripheral Entrepreneurial Ecosystem in Vietnam

This paper examines how the composition of early financing is associated with the survival of startups founded during the COVID-19 shock, and whether exposure to the shock modifies these associations. We use hand-collected survey data on 301 startups founded during 2021–2022 in five provinces of Vietnam’s Mekong Delta, a peripheral entrepreneurial ecosystem in a bank-based emerging economy, and follow them for up to 56 months, observing 114 market exits. In Cox proportional hazards models, debt, angel capital, and family-and-friends funding are associated with lower exit hazards, and COVID-19 exposure with a markedly higher hazard (67.1% of exposed versus 4.3% of non-exposed ventures exited). These associations hold in a parsimonious specification (events per variable = 10.4), in a ridge-penalized model, and after bootstrap optimism correction (C = 0.935). However, likelihood-ratio tests reject neither the interaction between COVID-19 exposure and founder equity (p = 0.22) nor that between exposure and debt (p = 0.95), so we find no statistical evidence that the shock changed the value of financing sources. Landmark analyses further show that the protective association of debt is concentrated among early exits: none of the 36 ventures that exited within 18 months had borrowed, and the association disappears among ventures that survived for 24 months (HR = 1.08; 95% CI 0.96–1.21). The evidence is therefore consistent with reverse causality, in which ventures must survive in order to obtain credit. We discuss the implications for founders, lenders, and startup policy, and for the design of research on financing and survival.