The Impact Of Founder's Reputation On Acquiring Venture Capital

The current society is in the process of technological revolution and industrial transformation.The quality of economic development depends more and more on the content of science and technology.High-quality technology can support high-quality economic development.High-tech startups which are based on science and technology,such as biomedicine,intelligent manufacturing,information technology,new energy and new materials,have become new economic growth points for promoting social development.Therefore,China attaches great importance to the development of high-tech startups.Because of the lack of credit records and collateralized assets,it is difficult for startups to obtain funds from traditional financial channels.However,venture capital does not pay much attention to the existing financial situation,they focus on future earnings.Venture capital not only can provide fund support for startups,but also can provide nonfinancial support such as business resource and management experience.Venture capital that pursues “high risk and high return” usually invested in high-tech startups with “high technology and high returns”.But high-tech startups have applied cutting-edge science and technology,their products and business models have greater uncertainty and risk than traditional startups.Investors lack relevant professional knowledge to understand and judge the quality of technology.So,venture capital will face huge challenges in investment decision-making.Therefore,it is important to know how to help high-tech startups to acquire venture capital and help venture capital institutions to make investment decision.This study reviews the related researches on the factors that affecting startups' access to venture capital and the impact of reputation on investment decision.Then it combines existing reputation measurement methods and status characteristics theory to redefine founder's reputation as a combination of academic reputation,business reputation,political reputation and social reputation,and then evaluates founder's reputation from each of the four aspects based on reputation theory and signal theory.And explores the interaction between different reputation.First,this article makes use of prospectus and China Venture Capital Investment Development Report,etc.and selects the 301 companies that were listed on China GEM between 2009-2017 as sample base.Second,applies Logit model to study the correlations between founder's reputation and the odds of acquiring venture capital.Study results show that founder's reputation is positively correlated to the odds of acquiring venture capital,and there is an interaction effect exists between the four aspects,for example founder's social reputation weakens the positive effect of academic reputation.The results of this study provide theoretical support for the founders to establish and maintain their reputation and attract venture capital investors.On the other hand,it also helps venture capital institutions to effectively evaluate startups from a new perspective,thereby reducing uncertainty in the investment process and increasing the chances of successful investment.