A Start-Up’s R&D Stages and the Evolution of Financing Sources: Evidence from the Biotechnology Industry

Kang Hyunsung D ()
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Kang Hyunsung D: Campbell School of Business, Berry College, 2277 Martha Berry Hwy NW, Mount Berry, USA

Entrepreneurship Research Journal, 2018, vol. 8, issue 3, 19

Abstract: The co-existence of angel, independent venture capital (IVC), and corporate venture capital (CVC) in the entrepreneurial finance market raises a natural question of why a start-up finances its projects from one source over another. This question becomes more complicated to address because a start-up grows or declines dynamically. Using a life cycle theory of entrepreneurial finance, which suggests that a start-up uses several financing sources as it reaches certain thresholds in its life cycle accordingly, I explore this selection issue with my dataset on 113 biopharmaceutical start-ups. I find that these start-ups tend to finance their projects mostly from solely IVCs or CVCs rather than angels and syndicated investors combining IVCs and CVCs when they have more preclinical and phase I products in their R&D pipelines; and from CVCs or syndicated investors rather than angels and IVCs when they do more phase II and phase III products.

Keywords: venture capital; corporate venture capital; angel; entrepreneurial finance; biopharmaceutical industry (search for similar items in EconPapers)
JEL-codes: G34 L24 L65 O32 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1515/erj-2017-0159

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