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

npersonal savings 924 $5,000 $12,000family 188 $4,000 $12,000$0 used 184 $0 ---credit card 170 $4,000 $5,600bank loan 120 $15,000 $25,000friend & colleagues

64 $2,000 ---

2nd mortgage / car 53 $20,000 ---other 46 $195,000 $2,013asset backed debt 48 $37,500 ---

(cont.)source n median median

after registratio

nbank line of credit 45 $20,000 ---team loans 33 $10,000 ---leases on equip. 31 $13,500 ---supplier credit 27 $5,000 ---employees 5 $4,000sba 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 fundingq266 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/partnerq272 friends & familyq274 team member friends & familyq276 employer

(cont.)variable number source of fundingq277a 2nd mortgageq279 bankq281 sbaq282a credit cardsq284 venture capitalistsq286 personal finance companyq288 other

sources of fundingpsed I – waves r, s, tvariable number source of fundingr770 s770 t770 total equity, all sourcesr770a 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 fundingr775x 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

contact:cj.frid@gmail.comgartner@clemson.edu

Casey FridPace University

William GartnerClemson University