do entrepreneurs get what they want? entrepreneurs’ expectations prior to venture creation casey...
TRANSCRIPT
Do entrepreneurs get what they want?Entrepreneurs’ expectations prior to venture creation
Casey FridPace University
William GartnerClemson University
nascent financing in the united states, 2005 - 2010
Non-financers$0 - $500212 firms
(20th percentile)
AverageMedian $8,500Mean $24,077738 firms
Super-financers$230,000-$27.5M
51 firms(95th percentile)
10t% 25% 50% 75% 90% 95% 99%
$0 $1,000 $5,450$23,75
0$80,00
0$200,00
0$1.9
million
distribution of nascent financing in the u.s. 2005 - 2010
frequency & amount of funding by source, 2005 - 2010source n median median
after registratio
n
personal savings 924 $5,000 $12,000
family 188 $4,000 $12,000
$0 used 184 $0 ---
credit card 170 $4,000 $5,600
bank loan 120 $15,000 $25,000
friend & colleagues
64 $2,000 ---
2nd mortgage / car 53 $20,000 ---
other 46 $195,000 $2,013
asset backed debt 48 $37,500 ---
(cont.)source n median median
after registratio
n
bank line of credit 45 $20,000 ---
team loans 33 $10,000 ---
leases on equip. 31 $13,500 ---
supplier credit 27 $5,000 ---
employees 5 $4,000
sba backed loans 3 $55,000 ---
venture capital 3 $60,000 ---
gov. (non sba) 1 $2,000 ---
differences in finance itemspsed I and psed II psed I
expected vs. acquired financing debt and equity mail in questionnaire items (QD1C QD1J QD1K) haphazard items from wave to wave
psed II pre-/post- registration financing Better coordination among waves
both contain items on financial planning
sources of fundingpsed I – wave qvariable number source of funding
q266 Have you asked your spouse or household partner for funding?
q266a Was the answer yes, no, or is the request still pending?
q268 How much do you expect from your spouse or household partner?
q270 team member spouse/partner
q272 friends & family
q274 team member friends & family
q276 employer
(cont.)variable number source of funding
q277a 2nd mortgage
q279 bank
q281 sba
q282a credit cards
q284 venture capitalists
q286 personal finance company
q288 other
sources of fundingpsed I – waves r, s, tvariable number source of funding
r770 s770 t770 total equity, all sources
r770a s770a t770a
total debt, all sources
r771x s771x t771x
personal cash contributions (savings, 2nd mortgage, credit card, personal finance firm)
r772x s772x t772x
team member personal cash contributions
r773x s773x t773x
family of founder
r773b s773b t773b
family borrowing on assets
r774x s774x t774x
friends & business associates
(cont.)variable number source of funding
r775x s775x t775xr77501 s77501r77502 s77502 (etc.)
banks (sba guarantee, personal finance company, vc firms, other institutions)
r776x s776x t776x
private investors
r777x s777x t777x
federal, state, or local gov. agencies
r778x s778x t778x
suppliers
r780 s780 t780 other
start-up capital expectations qd1c: how certain are you that the
business will be able to…
Obtain start-up | capital: | Freq. Percent Cum.---------------------+----------------------------------- Does not apply | 100 18.28 18.28 Very low certainty | 40 7.31 25.59 Low certainty | 87 15.90 41.50Neither high nor low | 149 27.24 68.74 High certainty | 107 19.56 88.30 Very high certainty | 64 11.70 100.00---------------------+----------------------------------- Total | 547 100.00
Obtain a banks help: | Freq. Percent Cum.---------------------+----------------------------------- Does not apply | 123 22.45 22.45 Very low certainty | 66 12.04 34.49 Low certainty | 98 17.88 52.37Neither high nor low | 147 26.82 79.20 High certainty | 63 11.50 90.69 Very high certainty | 51 9.31 100.00---------------------+----------------------------------- Total | 548 100.00
Obtain venture | capitalists help: | Freq. Percent Cum.---------------------+----------------------------------- Does not apply | 190 34.61 34.61 Very low certainty | 85 15.48 50.09 Low certainty | 67 12.20 62.30Neither high nor low | 138 25.14 87.43 High certainty | 48 8.74 96.17 Very high certainty | 21 3.83 100.00---------------------+----------------------------------- Total | 549 100.00
external $: certainty by gender
| R GENDER :NANCY Obtain start-up | CARTER CLEANED capital: | Male :CA Female:CA |---------------------+----------------------+ Does not apply | 30 70 | | 11.36 24.73 | ---------------------+----------------------+ Very low certainty | 21 19 | | 7.95 6.71 | ---------------------+----------------------+ Low certainty | 55 32 | | 20.83 11.31 | ---------------------+----------------------+Neither high nor low | 66 83 | | 25.00 29.33 | ---------------------+----------------------+ High certainty | 56 51 | | 21.21 18.02 | ---------------------+----------------------+ Very high certainty | 36 28 | | 13.64 9.89 | ---------------------+----------------------+ Total | 264 283 | | 100.00 100.00 |
bank $: certainty by race | R ETHNIC :NCRACEObtain a banks help: | WHITE BLACK HISPANIC/ OTHER |---------------------+--------------------------------------------+ Does not apply | 88 23 9 1 | | 23.78 17.83 30.00 7.14 | ---------------------+--------------------------------------------+ Very low certainty | 45 16 3 2 | | 12.16 12.40 10.00 14.29 | ---------------------+--------------------------------------------+ Low certainty | 65 20 9 4 | | 17.57 15.50 30.00 28.57 | ---------------------+--------------------------------------------+Neither high nor low | 101 35 5 4 | | 27.30 27.13 16.67 28.57 | ---------------------+--------------------------------------------+ High certainty | 40 20 1 2 | | 10.81 15.50 3.33 14.29 | ---------------------+--------------------------------------------+ Very high certainty | 31 15 3 1 | | 8.38 11.63 10.00 7.14 | ---------------------+--------------------------------------------+ Total | 370 129 30 14 | | 100.00 100.00 100.00 100.00 |
bank $: acquired by race
| R ETHNIC acq_bank | WHITE BLACK HISPANIC/ OTHER |-----------+--------------------------------------------+ 1 | 65 11 1 1 | | 55.08 23.91 14.29 20.00 |-----------+--------------------------------------------+ 2 | 53 35 6 4 | | 44.92 76.09 85.71 80.00 |-----------+--------------------------------------------+ Total | 118 46 7 5 | | 100.00 100.00 100.00 100.00 |
acquired funds total capital acquired
males=$95,383; females=$71,018 whites=$107,765; African-Americans=$37,288;
Hispanics=$41,730 post-college degree=$191,221; no high school
degree=$66,818
external capital acquired males=$75,750; females=$53,000 whites=$82,806; African-Americans=$18,259;
Hispanics=$10,112
acquired funds (cont.) bank funds acquired
males=$41,905; females=$31,103 whites=$47,232; African-Americans=$6,542;
Hispanics=$0 post-college=$75,000; no high school=$74,000
personal funds used males=$50,398; females=$37,935 whites=$53,508; African-Americans=$27,087;
Hispanics=$38,161 post-college=$78,156; no high school degree=$33,893
findings(expectations by gender) similar levels of certainty regarding
external funding acquisition
…although females with low expectations say funding doesn’t apply while males express low certainty
findings(expectations by race) no differences in level of certainty in obtaining external
funding
…though 70% of Hispanics say obtaining bank funding does not apply or is unlikely
among those seeking bank financing, only 23% of African-Americans and 14% of Hispanics acquired it compared to 55% of whites
25% of whites acquired external funds compared to 14% of African-Americans and 12% of Hispanics
findings(expectations by education) external capital expectations are similar
…though 21% of those without a high school degree expressed very high certainty of obtaining external capital
…and 17% for VC, and 26% for banks
90% without a high school degree failed to acquire external funds
moving forward are females more realistic when setting
expectations? how does this translate into goal
accomplishment / actions / behaviors?
ignorance is bliss? does less formal education lead to over-optimistic expectations?
expectation or location? minority acquisition of bank financing
