The Role of Referrals in Financing Technology-based Ventures

Many referral mechanisms can be found in the context of entrepreneurship. Networks and third party referrals play a prominent role in spotting entrepreneurial opportunities and in acquiring the resources necessary for growth. In this dissertation, the focus is on the role of referrals in acquiring of one specific type of resource, namely financial resources. Referrals play an important role in both getting new ventures connected to financial resource providers and in the due diligence process of these potential investors. This dissertation focuses specifically on the acquisition of one type of funding by new ventures, namely the acquisition of venture capital (VC). In this dissertation, the role of explicit referrals in new-venture funding is studied along several dimensions. The main focus is on the network configurations and actor contingencies that determine which referrals are the most influential and successful. In addition, the VC funding process is divided into multiple stages to research whether the influence of referrals differs at the various investment stages. By combining both qualitative and quantitative techniques, a more complete understanding of the role of networks and referrals in new-venture funding is developed. Next to its theoretical implications this study has practical implications for entrepreneurs, incubators, venture capitalists and policy makers. A more systematic understanding of the role that referrals play in the funding process is a valuable asset for entrepreneurs applying for funding, universities designing incubators and governments making entrepreneurship policy.