STart-ups: Entrepreneurial trajectories and Funding of Innovation – STEFI

STEFI encompasses 4 work packages that focus on 1) data collection, 2) analysis of the innovation dynamics, 3) analysis of the early stages of financing dynamics, and 4) analysis of start-ups’ trajectories. Each work package details the objectives and methods based on a preliminary analysis of the data collected.
WP1: While the empirical implications of the research will mainly concern monitoring of regional firms by HDFID, we combine the regional datasets with a national data collection. This will increase the robustness of the estimates, inform relevant regional and sectoral comparisons, and help resolve issues linked to the attrition of regional data.
WP2: The first objective of STEFI is to highlight the relative information content of various innovation signals according to the category of investors. This goal is divided into 2 sub-issues. The first aims to describe the diversity of innovation signals and to highlight potential existing patterns of combinations of signals. This initial objective will be informed by both quantitative and qualitative methods. The second objective focuses on the value relevance of each signal to anticipate future fundraising schemes. Proposals rely on the first analysis of the data and we note when the proposal warrants additional data collection. The third objective focus on the signal from the entrepreneurs’ perspective with a qualitative approach
WP 3 - objective 1: The financial dynamics triggered by public funding at the 2nd round of funding
We examine how financial support provided by different kinds of public institutions at the first funding stage affects subsequent ones. , we investigate the effect of the characteristics of the public funder involved in the first fundraising stage on the amount of funding received at the second stage. This analysis will be performed through a regression analysis on a sample of 2265 documented firms that obtained funding at least twice.
objective 2: The financing path of the firm up to 5 years old
We refer to configurational methods to identify the main funding scenarios of every deal (cross sectionally) from the firm’s creation to its 6th year (longitudinally). Secondly, we estimate the determining aspects of this financing path at every new funding stage. We use the panel data to test the innovation signals on both the amount of funds raised and the configuration of investor categories, while taking the characteristics of previous deals and past innovation signals into account.
WP4: Start-up financing and performance trajectories. Finally, STEFI aims to capture the impact of innovation and financing metrics identified in WP2 and 3 on the start-up’s trajectory. This part will also focus on the synergies between the start-up’s various financing partners at each stage of development, and on the link between innovativeness and performance.

The transfer of methodological skills in data analysis as well as the meaning to be given to certain economic and legal indicators according to the stage of development of the start-up will be ensured by the researchers at HDFID. This work developed in Work Packages 2 to 4 and by matching techniques between regional and national databases will result in a better identification of start-ups to be supported by public agencies as well as in a better identification of financing strategies for both public and private actors.

The entrepreneurial finance research program is pluridisciplinar in nature. This is both its strength and its weakness, and it now seems necessary to promote a strengthened dialogue between researchers engaged in this research field.
Nguyen et al. (2021) note in this respect that the community of recognized researchers in this field is partly hermetic and supported by a limited number of American or European research teams. Moreover, Cumming and Vismara (2017) point out that segmentation is not only thematic: it is also disciplinary and there is indeed a segmentation of teams in entrepreneurial finance depending on whether the attachment of authors and publication media used is rather financial, rather economic or rather entrepreneurial. This point is particularly sensitive and our ambition is therefore to use this project to bring together the teams of researchers who, in France and abroad, work in entrepreneurial finance. In order to achieve this institutional result we will rely on the Academy of Entrepreneurship and Innovation, where some of us are very involved.
While the trajectories of companies such as Facebook and Google have been widely publicized by the media to illustrate the rise of start-ups, the situation of French start-ups is much less documented. These are mostly press articles that rarely present the workings and mechanisms specific to the trajectory of start-ups, in particular their financial trajectory. In particular, we plan to publish a book on the cases of French start-ups, focusing on their financing path.

STEFI aims to identify the innovative potential of start-ups in order to better manage the seed and funding support, especially public funding. Thanks to the co-construction of data bases, the research team and HDFID assess the value relevance of early stage signals of innovation and how they interact with the level of funding provided by backers. The research aims to explore what can explain the presence of a variety of funders in early stage equity funding and whether public funds play a pivotal role in this process. A better understanding of start-up trajectories will help to anticipate the performance in terms of growth, amount raised, and survival. Transfer competencies between the research team and the company will be based on the co-construction of data bases and new innovation indicators. The meaning given to these indicators will also be a joint work. Moreover, researchers usually work on a single financial vehicle. The new data bases will provide the combination of a large range of investors, allowing to improve theoretical knowledge on innovation signals and funding trajectories of start-ups.