| This dissertation investigates whether or not a venture capital firm's status or reputation has significant social-psychological effects as a status indicator. Specifically, it endeavors to answer the question: Are affiliations with venture firms a viable status signal for start-up companies in the equity financing marketplace? And as a corollary, if they are, then how do these status affiliations compare in strength to other important factors in their ability to influence position in the market landscape?; To answer these questions, this study begins by examining the contemporary venture capital organization and the e-commerce industry, since the latters genesis was heavily venture capital intensive.; Next, several testable hypotheses are developed. In sum, the hypotheses assert that, when controlling for other significant variables, not only will there exist a status effect but also that it will be stronger than other effects on the investment performance of portfolio companies. The hypotheses also posit that the same would be true in terms of effect on IPO (Initial Public Offering) outcomes.; Data used to assess the hypotheses are derived from the Venture Economics VentureXpert database, 2000–2001. From this source, information from 150 e-commerce companies—funded between 1995 and 1997, and the 204 venture organizations which funded them—are gathered.; Two independent variables are created from the data: the Investment Performance variable and the probability to have an IPO variable. There are six independent variables: Total Number of Start-up Investments, Log of Amount of Money Invested, a venture firm's Years of Experience, being in Silicon Valley, being in Massachusetts, and VC firm Status, which was determined by the number and the statuses of those with whom a firm co-funded.; On the whole, the results of the analysis, using a multiple linear regression model, indicate broad support for the hypotheses. In sum, the analysis implies that status is a major and not tangential factor in the portfolio performance of a venture firm.; Four case studies are also presented. The first two feature a high-status and a low-status venture firm; the last two are a successful and a failed start-up.; Finally, potential amplifications and extensions of this research are offered. |
