Twitter sentiment as a weak signal in venture capital financing

Andranik Tumasjan, Reiner Braun and Barbara Stolz

Journal of Business Venturing, 2021, vol. 36, issue 2

Abstract: How do venture capitalists (VCs) incorporate weak and strong signals in the valuation of technology-based startups? Based on a sociocognitive perspective of signaling theory, we introduce Twitter sentiment as a novel and weak signal, which we juxtapose with patents as a traditional, strong signal. While we find a positive association between both signals and VCs' venture valuations, our results reveal that Twitter sentiment does not correlate with actual long-term investment success, whereas patents do. Additionally, we identify and test novelty and experience characteristics (i.e., startup age and VC firm experience) as boundary conditions for our proposed signal-valuation relationships.

Keywords: Venture capital; Valuations; Twitter sentiment; Patents; Signaling theory (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbvent:v:36:y:2021:i:2:s0883902620306704

DOI: 10.1016/j.jbusvent.2020.106062

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