Abstract

Drawing on signaling theory, this research explores the understudied symbiotic relationship between early stage seed funders and later stage venture capital (VC) investors. We build on research that shows ventures enjoy legitimizing benefits from third-party endorsements to reason that a venture’s source of seed funding can play an important role that assists in resolving information asymmetries about the quality of a young venture. We argue that the investment of seed funding investors, such as angels and crowdfunders, and the affiliation endorsements that result, play an important role in signaling venture quality and potential to outsiders—thereby influencing investor screening decisions.

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