The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1355-2554.htm
IJEBR
18,1
28
Received 21 November 2010
Accepted 22 November 2010
International Journal of
Entrepreneurial Behaviour
& Research
Vol. 18 No. 1, 2012
pp. 28-47
q Emerald Group Publishing Limited
1355-2554
DOI 10.1108/13552551211201367
Cases of start-up financing
An analysis of new venture capitalisation
structures and patterns
Andrew Atherton
Enterprise Research and Development Unit, University of Lincoln, Lincoln, UK
Abstract
Purpose – This paper seeks to understand the dynamics of new venture financing across 20 business
start-ups.
Design/methodology/approach – A total of 20 cases were explored, via initial discussions with the
founder(s), and follow-up contact to confirm sources of financing acquired during new venture
creation. This approach was adopted because of the challenges associated with acquiring full details of
start-up financing, and in particular informal forms of new venture financing.
Findings – Significant variation in, and scale of, new venture financing was identified. In multiple
cases, funding patterns did not tally with established explanations of small business financing.
Research limitations/implications – The primary limitation of the analysis is the focus on a small
number of individual cases. Although this allowed for more detailed analysis, it does not make the
findings applicable across the small business population as a whole. New ventures acquired very
different forms of finance, and in different configurations or “bundles”, so creating a wide range of
start-up financing patterns and overall levels of capitalisation. This suggests that multiple factors
influence founder decisions on start-up funding acquisition. It also indicates the wide divergence
between highly capitalised and under-capitalised start-ups.
Practical implications – Many of the new ventures were started with low levels of capitalisation,
which as the literature suggests is a strong determinant of reduced prospects for survival. This
suggests a possible “financing deficit”, rather than gap, for a proportion of business start-ups.
Originality/value – The paper provides an alternative methodology for considering new venture
financing, and as a result concludes that standard, rational theories of small business financing may
not always hold for new ventures.
Keywords New venture, Business start-up, Business formation, Financing, Entrepreneurship
Paper type Research paper
Introduction
From a policy maker’s perspective, a lack of funding discourages people from starting
businesses (Bank of England, 2003, 2004; EC, 2003; OECD, 1998). There is empirical
support for the policy assertion that small businesses can face difficulties in acquiring
finance that constrain their prospects for venture creation, survival and growth (Binks
and Ennew, 1996; Harding and Cowling, 2006; Holmes and Kent, 1991; Hughes and
Storey, 1994; Landstrom and Winborg, 1995; Lopez-Gracia and Aybar-Arias, 2000; Reid,
2003), although there are studies that question the existence of funding gaps (Uusitalo,
2001). Theoretically-based arguments for and against funding gaps mostly conclude that
small firms face finance constraints (Ang, 1992a, b; Binks et al., 1992) or are discouraged
(Kon and Storey, 2003), although some propose that such issues are trivial or non-existent
(Cressy, 1996; Parker, 2002). Access to external equity, in particular, has long been
identified as a development constraint for many small firms (Binks and Ennew, 1996;
Bolton Report, 1971; Harrison et al., 2004; Mason and Harrison, 1996).
 Financing constraints are likely to be particularly acute for start-ups, given their Cases of start-up
lack of trading history and the risks associated with funding a new venture (Verheul financing
and Thurik, 2001). Bhide (1992) argued that funding is a central concern for new
ventures, even though most do not pursue “big money” models of start-up financing.
Insufficient financing of new firms leads to a greater likelihood of failure (Basu and
Parker, 2001; Cassar, 2004; Chaganti et al., 1995; van Auken and Neeley, 1996).
Conversely, sufficient capitalisation at the outset improves future prospects for growth 29
(Alsos et al., 2006; Chandler and Hanks, 1998). Initial capitalisation structures therefore
offer insight into the entrepreneurial process of business formation and future
prospects for both survival and growth (Smallbone et al., 2003; Storey, 1994).
The aim of this paper is to examine the relevance and applicability of established
explanations of capitalisation structures of small businesses to business start-ups.
Whereas the majority of studies of capitalisation structures have used large-scale
surveys or publicly-available financial information, this paper uses in-depth analysis
of a small sample of new ventures. The reasons for this are two-fold. Firstly, direct and
ongoing engagement with the founders of these businesses is more likely to lead to full
divulgence of all financing sources than less engaged methods of data acquisition.
And, secondly, case approaches are a useful means of exploring theoretical
propositions (Yin, 1989). An initial review of pecking order and debt-equity trade-off
considerations of small firm funding suggests that these approaches may not provide a
comprehensive or sufficient explanation of start-up financing (Atherton, 2009). The
findings in this paper indicate that new ventures do not always or necessarily follow
these established explanations of financing structures and patterns.

Research questions
Accounts of the financial structures of firms have been particularly influenced by two
alternative explanations of capitalisation patterns; namely debt-equity trade-offs
(Modigliani and Miller, 1958) and pecking order theorisations (Myers, 1984; Myers and
Majluf, 1984). When applied to small firms, the former proposes a trade-off between the
tax advantages of debt financing over equity and increased risk of possible bankruptcy
arising from financial stress if debt levels become too high (Verheul and Thurik, 2001).
Pecking order theorisations, on the other hand, posit a preference for internally-generated
retained earnings over externally acquired finance, and for debt over equity when
external finance is sought out. Both approaches have since been used to examine and seek
to understand the financing structures of small firms, and in particular whether such
explanations hold for smaller enterprises, with varying results (e.g. Berggren et al., 2000;
Chaganti et al., 1995; Hamilton and Fox, 1998; Holmes and Kent, 1991; Jordan et al., 1998).
However, the results have been variable; with some studies supporting these
explanations of funding patterns (e.g. Norton, 1991, when examining high growth
firms), whereas others have found either no corroborating evidence (e.g. Chittenden et al.,
1996), or limited support; generally because funding for new ventures is “constrained” due
to a lack of access to one or more forms of financing (Howorth, 2001).
A key feature of pecking order explanations of firm financing that is lacking in
debt-equity trade-off considerations is the existence of information asymmetries due to
varying levels of information about the venture held by the founder and by prospective
funders. Supporting this, some studies have established evidence of pecking order
patterns, but not of static debt-equity trade-off explanations of choice of financing by
IJEBR small businesses (Watson and Wilson, 2002). Information asymmetries-based
explanations of firm financing seem to be highly relevant to new ventures, because
18,1 they are more likely to be “opaque” due to a lack of trading history and the practical
barriers to undertaking due diligence on new and unproven ventures (Cassar, 2004;
Verheul and Thurik, 2001). Information asymmetries are likely to increase the cost for
new ventures of raising external finance, as lenders seek higher interest rates and
30 greater equity shares to compensate for the additional risk of funding an unproven new
venture. Despite the apparent relevance of information asymmetries to the new
venture, and the extensive literature on small business financing that adopts this
perspective, it has been noted that there is a relatively small literature focusing on the
effects of such asymmetries on new ventures (Paul et al., 2007).
There is also a growing body of work that that has identified additional factors that
affect small business capitalisation structures, such as: national differences in
institutional frameworks (Hall et al., 2004); sensitivity to cost of debt, and to an extent
equity (Reid, 1996, 2003); personal preferences of the entrepreneur (Gibson, 1992;
Kuratko et al., 1997; Petty and Bygrave, 1993); and the particular characteristics of the
new venture (Cassar, 2004). Some of these additional explanatory factors have a
cognitive dimension, such as personal propensity to take on different levels of risk and
the experientially-framed preferences of owner-managers, so suggesting subjectivised
influences on patterns of new venture financing. Others, such as different institutional
frameworks from country-to-country, are contextual. This has led to an emerging view
that the determinants of new venture financing patterns will be affected by a wide
variety of factors, only some of which are related to financial markets and rational
economic decision-making consideration (Atherton, 2009):
RQ1. To what extent do either debt-equity trade-offs or pecking order approaches
explain patterns and structures of start-up financing?
There are indications that new firms are more likely to rely on debt, and in particular
short-term debt, than equity financing during start-up and in their early years of
operation (Hughes, 1997; Titman and Wessels, 1988; Dwyer and Lynn, 1989).
Reluctance to lose control over their own business is seen as a reason why many
founders of firms do not seek out external equity finance (Howorth, 2001). Capital
markets and other forms of larger-scale equity investment typically are not available to
new firms (Ang, 1992b; van Auken and Neeley, 1996; Coleman and Cohn, 1999). New
firms are likely as a result to be pushed towards debt capital when founding a new
venture, generating a “large debt service” requirement (van Auken and Neeley, 1996)
and increasing the likelihood of liquidity problems during the early trading period
following on from start-up (van Auken and Carter, 1989):
RQ2. Is there evidence of greater use of debt than equity amongst new firms?
Start-ups and new ventures, unlike established small businesses, have no substantive
trading history and so are unlikely to have generated sufficient levels of retained profit
to fund development internally (Sjogren and Zackrisson, 2005). Even when trading for
an initial period, new ventures will have to cover establishment costs through revenue
generation and so are unlikely to generate retained earnings that can be re-invested in
the new venture:
RQ3. Is internal finance generated from retained earnings a source of funding for
new ventures?
Constraints to internal as well as external finance suggest that the funding options for Cases of start-up
new ventures are limited. Founders of new ventures are likely, as a result, to seek out financing
alternative financing mechanisms, in the form of bootstrap or “supplementary”
financing (van Auken, 2005; Hughes, 1997). Bootstrap finance, i.e. funding other than
that acquired from personal savings or external debt and equity, has been found to be
an important source of start-up finance in many successive studies (Bhide, 1992; Carter
and van Auken, 2005; Ebben, 2007; Ebben and Johnson, 2006; Lam, 2010; van Auken, 31
2005; van Auken and Neeley, 1996). This paper follows on from Carter and van Auken
(2005, p. 135) in defining bootstrap financing as funding other than personal funds
from non-formal sources, including: personal loans applied to the venture; credit card
debt; delaying payments; minimising accounts receivable; sharing resources. It allows
the new ventures to secure “resources at little or no cost” (Harrison et al., 2004), and so
may be preferred during start-up when access to funding is likely to be constrained:
RQ4. To what extent do start-ups acquire and deploy “supplementary” bootstrap
funding as an alternative to formal debt and equity or internally generated
funds?
The predominant form of financing for many, if not most, new ventures is the founder
or founding team (Berger and Udell, 1998; Carter and van Auken, 2005; Cassar, 2004).
Personal investment “signals” to investors and lenders that the founder or founding
team are committed to and confident about the future development of the venture, and
so provides a basis for justifying external financing of a new venture (Myers and
Majluf, 1984; Prasad et al., 2000). Insider finance is likely, as a result, to account for a
significant proportion of start-up funding and can help the founder(s) to acquire
financing from sources outside the new venture:
RQ5. Are personal funds a significant proportion of start-up capitalisation, and
are they associated with external funding by other actors?

Methodology
A case-based approach to data collection and analysis is suitable for examining a
particular issue or phenomenon (Chetty, 1996). Detailed analysis of specific cases via
direct interaction with new venture founders will be particularly important for
understanding the “opaque” capitalisation structures of new ventures (Cassar, 2004), as
well as the evolving and often improvised structures of business start-up funding
(Atherton, 2009). The data presented are financial in nature, given the specific research
propositions and questions that are the focus of this paper. Although not consonant
with current approaches in the small business literature, which tend to view case-based
data analysis as qualitative (Chetty, 1996; Perren and Ram, 2004; Romano, 1989),
Eisenhardt (1989) noted that case approaches relate to the ways in which the data are
extracted, rather than to a particular types of data:
[. . .] evidence may be qualitative (e.g. words), quantitative (e.g. numbers), or both (Eisenhardt,
1989, pp. 534-535).
Many case-based approaches in the small business and entrepreneurship literature
have concerned themselves with one or a small number of ventures (e.g. Atherton and
Hannon, 2000; Rod, 2006; Vinnell and Hamilton, 1999). A larger sample of cases was
used for this study in order to provide for sufficient variation in the scale, sector and
IJEBR nature of the start-up and the possible diversity of types of start-up financing
18,1 postulated in this paper’s review of the literature. A wide range of industries and types
of new venture were included in the study, as can be seen in Table I. This provided a
stronger base on which to draw conclusions from the analysis, as the sample although
not statistically relevant, was sufficiently broad to encompass different industries and
experiences of new venture creation. This follows a previous analysis of small firm
32 demand for finance, which used 13 case studies (Howorth, 2001), and is based on the
tenet that a greater number of cases allow for improved pattern recognition during
data analysis (Eisenhardt, 1989; Yin, 1989). A total of 20 new businesses that had been
operating for less than two years at the time of interview were identified through
recommendations from publicly-funded agencies based in the North of England that
offered counselling, advisory and training services to new business start-ups (Table I).
These businesses varied in terms of sector and also size. Amongst the sample were:
sole traders (ventures 8, 13, 15, and 16); micro-enterprises (ventures 6 and 18), some of
which were family-owned and run (ventures 3 and 20); new ventures that grew rapidly
to become established small businesses with between 20 and 30 employees (ventures 7,
8 and 14); and one large-scale start-up that rapidly grew to over 50 employees, and
continued to grow beyond the initial start-up period (venture 2). Referrals from
professional advisers were seen as likely to identify new venture founders who will be
more disposed to seek out assistance and resources when establishing a new business,
and so would be likely to acquire multiple forms of finance from different formal and
informal sources. It is recognised, however, that this sample is more likely to have
taken up publicly-funded sources, such as the small firms loan guarantee scheme (now
enterprise guarantee fund), and responses as a result will show a tendency towards
such subsidised forms of public support for business start-up. Initial contact and
interviews predated the current economic downturn, and consequent constraints on

Venture Nature of business Key characteristics

1 Car dealership Franchise

2 Branded snack foods Team start limited company
3 Pharmacy Co-owned by husband and wife
4 Engineering 3rd business started by founder
5 Water management 3rd business started by owner-manager
6 Scaffolding Two directors, limited company
7 Industrial flooring Owner-manager acquired company
8 Organic chemicals Started as sole trader
9 Media post production Directors started venture following redundancy
10 Communications Prototype product developed over four years
11 Glass design Started as sole trader
12 Industrial components Limited company set up following redundancy
13 Hairdresser Started as sole trader
14 High tech composites High tech applications developed with university
15 Modelling agency Started as sole trader
16 Retail Started as sole trader
17 Engineering Launched business to sell new paint product
Table I. 18 Electrical contractor Limited company set up by two partners
Summary profiles of new 19 Nursing agency Franchise
ventures 20 Lighting supplier Co-owned by husband and wife
credit from banks and other sources that characterise current financial markets. These Cases of start-up
ventures, in other words, enjoyed superior prospects of acquiring finance to those
available to new venture founders today. For each venture, data collection involved:
financing
.
an initial interview, lasting between 112 to 2 hours;
.
at least one, and typically two to three, follow-up telephone and email contacts to
confirm the analysis; and
33
.
integration of secondary data, including company reports acquired during or
after the initial interview.

The focus throughout was on identifying the types of funding they acquired and used
to start their ventures.

Results
Types and sources of start-up finance
Start-up financing can be considered in terms of type, i.e. form, as well as source
(Chaganti et al., 1995; Bank of England, 2004). Seven types, and ten sources, of start-up
finance were identified amongst the interviewed businesses (see Tables II and III).
External equity was the most valuable type of finance, totalling £2 million or 48.1 per
cent of all funding secured. Almost all of the external equity came in the form of
venture capital investment and most of it was acquired by one business, reflecting the
frequently reported tendency for low levels of venture capital investment in all but a
small proportion of start-ups (Bank of England, 2003; Mason and Harrison, 1996; Reid,
1996). Two of the businesses received venture capital equity investments of £100,000
each. Formal loans (debt) came primarily from banks, although other sources of loans,
mostly offered at subsidised rates and on special terms, were also evident as was
widespread use of the Small Firms Loan Guarantee Scheme. The total value of formal
loans greatly exceeded the value and frequency of start-up financing by bank
overdraft, and more long-term debt was acquired than short-term debt.
Informal debt and equity, including the founder’s own savings and funding
provided by family and friends, accounted for around one-seventh of the total value of
all start-up funding acquired, but was used widely by three-quarters of the sample.
Fourteen businesses had invested their own savings and one had taken out a personal
loan to help finance start-up. In most cases, the investments were relatively low, with
ten founders investing between £1,000 and £10,000. The take-up and use of grants was
common in the sample. Local government grants were small, ranging from £750 to
£5,000. Central government grants ranged from £15,000 to £40,000, and mostly were
for innovation or R&D purposes. Hire purchase, leasing and factoring accounted for
£48,000 of all financing acquired by the start-ups, and were only used by two of the
businesses, both of which had a relatively high capitalisation value.
Although significant in value terms, external equity was an uncommon form of
funding for most new ventures. In contrast, loans and informal finance were common
across the sample. None of the respondents indicated that they had started trading
prior to formal launch of the venture, and so were not able to use retained profits to
finance the business. Tables II and III therefore indicate a propensity to fund business
start-up through informal finance and debt funding, rather than through external
equity and retained profits, with a very small proportion acquiring equity investment
from venture capitalists.
 34
18,1

acquired
IJEBR

Table II.
Types of start-up finance
Finance type Total Percent of total Frequency % No. businesses % Mean/type Mean/business Minimum Maximum

Formal equity £2,000,000 48.1 4 5.6 3 15 £500,000 £666,667 £100,000 £900,000

Formal loan £1,131,500 27.2 18 25 15 75 £62,861 £75,433 £1,000 £220,000
Informal investment £670,000 16.1 18 25 16 80 £37,222 £41,875 £500 £500,000
Overdraft £142,000 3.4 5 6.9 4 20 £28,400 £35,500 £10,000 £50,000
HPLF £48,000 1.2 3 4.2 2 10 £16,000 £24,000 £8,000 £25,000
Grant £156,450 3.8 18 25 12 60 £8,692 £13,038 £750 £50,000
EAS £10,300 0.2 6 8.3 6 30 £1,717 £1,717 £1,000 £2,000
Total/average £4,158,250 100 72 100 8.3 £93,556 £122,604 £17,321 £249,571
 Cases of start-up
Source Total Frequency Transaction average
financing
Venture capitalist £2,000,000 4 £500,000
Own funds £517,500 15 £34,500
Business partner £525,000 1 £525,000
SFLGS £276,000 6 £46,000
Other loan guarantee £220,000 1 £220,000 35
Bank £208,000 9 £23,111
Family/friends £152,500 3 £50,833
Central government grant £135,000 5 £27,000
Non-bank loan £44,500 6 £7,417
Local government grant £17,200 10 £1,720 Table III.
Other £62,550 12 £5,213 Sources of start-up
Total £4,158,250 72 £57,753 financing acquired

Capitalisation values
The capitalisation values of each start-up are summarised in Table IV. The total
capitalisation value varied significantly across the cases, from a high of £2.2 million to
a low of £3,050. The majority of capitalisation values at start-up were below £50,000
(12/20), and only one was above £550,000. The mean capitalisation value was
£207,912.50, reflecting start-up number 2, which had a total capitalisation of £2.2
million. Without this outlier, the mean fell to £97,912.50. The median was between
£43,200 and £33,000, indicating that total capitalisation across the group was
dominated by a small number of highly capitalised start-ups, and that total start-up

Co. Total Number of funding transactions Average per transaction

2 £2,200,000 5 £440,000
1 £550,000 3 £183,333
3 £370,000 2 £185,000
6 £305,000 4 £76,250
10 £182,000 7 £26,000
4 £153,000 7 £21,857
14 £106,750 5 £21,350
5 £80,000 3 £26,667
9 £46,750 4 £11,688
7 £43,200 3 £14,400
8 £33,000 4 £8,250
19 £22,000 2 £11,000
18 £20,000 3 £6,667
20 £10,000 1 £10,000
16 £10,000 3 £3,333
11 £10,000 5 £2,000
15 £5,000 3 £1,667
12 £4,500 4 £1,125
13 £4,000 2 £2,000 Table IV.
17 £3,050 3 £1,017 Total and average
£4,158,250 3.65 £56,962 funding for each business
IJEBR capitalisation for most cases was below the mean. The variation in total capitalisation
18,1 values at start-up therefore was very wide; ranging from large-scale new ventures with
significant funding to micro-enterprises and sole traders with very low levels of
start-up capital.
The four start-ups with the highest capitalisation values (businesses 2, 1, 3 and 6)
accounted for 82.4 per cent of all capitalisation across the 20 new ventures, pointing to
36 high levels of concentration of funding in a small number of new ventures. Conversely,
the remaining sixteen new ventures accounted for around one-sixth of the sample’s
total capitalisation value only – highlighting low levels of capitalisation for these new
ventures. This indicates that a small number of new ventures were highly-capitalised,
but the majority had low levels of capitalisation below both the mean and median for
the sample.

“Bundling” patterns in start-up financing

Most of the new ventures acquired multiple forms of finance, so creating “bundles” of
new venture finance. All but three new ventures secured their start-up capitalisation
from between two and five different sources, with the mean number of sources being
3.65 and the median and mode both 3. Only one new venture started with funding from
one source only (perhaps not surprisingly founder’s savings), and only four of the 20
secured finance from fewer than three sources, whereas almost half (9/20) secured
start-up funding through four or more transactions. On the whole, start-ups with
higher capitalisation acquired finance from more sources than those with low
capitalisation.
Table V indicates that overdrafts, venture capital investment and other forms of
finance (hire purchase and leasing) were evident almost exclusively in higher
capitalised new ventures. This suggests a greater awareness of (case 2), or willingness

No. Personal O/D Loan VC HPL Grant Total No. sources Mean/source

2 * * * * £2,200,000 5 £440,000
1 * * £550,000 3 £183,333
3 * * £370,000 2 £185,000
6 * * * £305,000 4 £76,250
10 * * * * * £182,000 7 £26,000
4 * * * * £153,000 7 £21,857
14 * * * * £106,750 5 £21,350
5 * * * £80,000 3 £26,667
9 * * £46,750 4 £11,688
7 * * * £43,200 3 £14,400
8 * * * £33,000 4 £8,250
19 * * £22,000 2 £11,000
18 * * * £20,000 3 £6,667
11 * * * £10,000 5 £2,000
16 * * * £10,000 3 £3,333
20 * £10,000 1 £10,000
15 * * £5,000 3 £1,667
Table V. 12 * * * £4,500 4 £1,125
Patterns in “bundling” of 13 * £4,000 2 £2,000
start-up financing 17 * * £3,050 3 £1,017
to explore (cases 4, 6 and 10), funding options by founders of more capitalised new Cases of start-up
ventures. The founders of seven of the eight most capitalised new firms also had clear financing
growth plans for their businesses (cases 1, 2, 3, 4, 5, 10, 14).

Debt-equity distributions across the cases

Table VI lists debt and equity funding for each of the 20 new ventures, in order to
compare patterns of debt-equity distributions across the 20 cases. The total values of 37
grants and other forms of public subsidy obtained by the start-ups are also included
because they cannot be categorised as either debt or equity. Grants are defined as
non-repayable provisions of, typically public, finance to new ventures that do not result
in an equity stake or other claim over the business and its profits and value by the
funding provider. Grants have been included because they are a distinctive form of
finance with different characteristics and terms than debt and equity, and because of
their extensive use by most of the businesses included in the sample. Of the 20
businesses, 15 acquired grant funding during start-up ranging in value from £50,000 to
£1,000. Grants accounted for a large proportion of total financing amongst new
ventures with a low overall capitalisation value. However, they were also evident
amongst businesses with higher start-up capitalisation values, indicating that they are
not acquired only by new ventures that have difficulties in acquiring other forms of
start-up funding.
The debt, equity and grant distributions summarised in Table VI indicate that
propositions of debt-equity trade-offs, or businesses funded solely by debt, as optimum
financing structures do not hold across the cases (Modigliani and Miller, 1958, p. 294;
equations 32 and 33). Indeed, no clear patterns on debt-equity funding are evident
across the ventures. Instead, many patterns can be identified, including funded solely

Company Debt Equity Grant Total

2 £50,000 £2,100,000 £50,000 £2,200,000

1 £550,000 0 0 £550,000
3 £370,000 0 0 £370,000
6 £220,000 £85,000 0 £305,000
10 £55,000 £107,000 £20,000 £182,000
4 £98,000 £30,000 £25,000 £153,000
14 0 £102,000 £4,750 £106,750
5 £15,000 £40,000 £25,000 £80,000
9 £31,000 0 £15,750 £46,750
7 £35,000 £6,000 £2,200 £43,200
8 £5,000 £21,000 £7,000 £33,000
19 £20,000 0 £2,000 £22,000
18 £10,000 £8,000 £2,000 £20,000
11 £1,500 £4,000 £4,500 £10,000
16 £5,000 £4,000 £1,000 £10,000
20 0 £10,000 0 £10,000
15 £2,500 £500 £2,000 £5,000
12 £1,000 0 £3,500 £4,500 Table VI.
13 £2,500 £1,500 0 £4,000 Debt-equity-grant
17 0 £1,000 £2,050 £3,050 distributions across the
Total £1,471,500 £2,520,000 £166,750 £4,158,250 cases
IJEBR by debt (1, 3); funded solely by equity (20); funded by debt and grant (9, 19, 12); funded
18,1 by equity and grant (17); funded predominantly with equity (2, 5, 14, 8); funded
predominantly by debt (4, 6, 9, 19, 13). Overall, half the new ventures were funded with
a combination of debt, equity and grant, and 60 per cent with both equity and debt. The
very different distributions of debt and equity demonstrate that stable patterns of
debt-equity trade-offs are not evident across the sample. There is, in other words, no
38 indication of a common pattern of debt-equity distributions across the 20 new ventures.

Bootstrap, informal and intermediary financing

The literature suggested that bootstrap, informal and intermediary funding may be
important to business start-ups, particularly when not successful in or discouraged
from acquiring formal finance (Kon and Storey, 2003) or when strong social ties
provide access to bootstrap finance ( Jones and Jayawarna, 2010). Table VII indicates,
however, that only two of the firms used non-business personal funding, in these cases
personally secured loans, as a form of bootstrap finance during business start-up
(although the majority invested their own savings as capital to secure equity in their
own ventures). When financing options were discussed with the founders, both in the
initial interview and when feeding back and discussing the results, the author asked
each respondent about which, if any of the following forms of bootstrap finance had
been used (following Carter and van Auken, 2005): personal loans applied to the
venture; credit card debt; delaying payments; minimising accounts receivable; sharing
resources. Informal funding from family and friends was particularly significant for
business number 3, accounting for almost half of the capitalisation secured for this
new venture. Overall, however, informal finance was only found in three of the

Bootstrap Informal Intermediary

Co. Personal loan Family/friend HP/leasing Factoring Total capitalisation

2 £2,200,000
1 £25,000 £550,000
3 £50,000 £100,000 £370,000
6 £305,000
10 £2,000 £182,000
4 £20,000 £15,000 £8,000 £153,000
14 £106,750
5 £80,000
9 £46,750
7 £43,200
8 £33,000
19 £22,000
18 £20,000
11 £10,000
16 £10,000
20 £10,000
15 £500 £5,000
Table VII. 12 £4,500
Bootstrap, informal and 13 £4,000
intermediary financing 17 £3,050
by business Totals £70,000 £102,500 £40,000 £8,000 £4,158,250
20 businesses. Moreover, only three of the new ventures secured intermediary funding Cases of start-up
in the forms of hire purchase, leasing and factoring. financing
These forms of financing were particularly evident in the cases where total
capitalisation values were high (over £100,000). Of the ventures with the six highest
capitalisation values, four used these forms of financing when starting up. In three of
these cases, informal and intermediary funding mechanisms accounted for only a small
proportion of total capitalisation. Business 4 was funded by one form of bootstrap 39
financing – a personal loan taken out by the founder – and by both leasing and
factoring agreements with funders. There is also little evidence of bootstrap financing
as a recourse should formal sources of funding not be acquired. For lower capitalised
ventures, other forms of funding were acquired instead; in particular own funds and
formal loans (i.e. external debt).

Signalling effects
Myers and Majluf (1984) argued that the use of own funds in a start-up is a “signal” of
commitment to and confidence in the new venture. Money invested by the founder in
the new venture provides external funders with a degree of reassurance that the starter
is committed to, and confident about, the prospects of, the business (Prasad et al., 2000).
Signalling as a result helps to convince funders that the new venture is a viable
prospect for financing, in part because the risk is shared with the founder who is
committing their own capital. For the business founder, commitment of own funds
therefore has the potential to leverage in external funding and so creates opportunities
to increase the capitalisation value of the start-up. Table VIII identifies possible
signalling effects, based on the premise that where businesses are funded by both own
funds and either external debt or equity (formal debt, formal equity) then signalling
effects may have occurred and checking this against the individual cases for
corroborating evidence. Individual cases were reviewed to determine whether founders
were deploying personal investment to attract or secure other forms of financing. In
each case where signalling was corroborated, the founder indicated that they sought to
“match” their own funding with bank lending, in particular, in order to maximise the
value of start-up capitalisation and, significantly, to persuade lenders to offer larger
loans. In the cases where venture capital was secured, founders deliberately invested a
larger sum to attract the desired amount of external equity investment (case 2) or
committed all their available savings, even though meagre, to “signal” commitment
(cases 10 and 14).
Clear evidence of signalling could only be found in nine of the 20 cases. In some
cases, external funding was used to capitalise the new venture without personal
investment by the funders (businesses 1, 3, 9, 12, 19). In cases 1 and 3, formal debt
values are high (£525,000 and £220,000 respectively). Debt was sourced from a
“sleeping” business partner in the case of new venture 1, with whom the founder had a
long-standing personal as well as business relationship. The loan guarantee acquired
by the founder of new venture 3 was secured against an equity investment by members
of the founder’s family, suggesting a leverage effect (rather than signalling) if the
notion of own funds is extended from the founder to the founder’s family. Signalling
can also be seen not to occur where own funds are invested, but external debt and
equity are not (cases 17 and 20). These two businesses had low start-up capitalisation
values, of £10,000 and £3,050 respectively, and were cautious about the scale of the
 40
18,1
IJEBR

Table VIII.
Likely signalling effects
Co. Own funds Formal debt Formal equity Signalling? Corroborating case evidence
1 Founder did not have personal funds to invest, and
relied on “sleeping” partner to finance franchise
£0 £550,000 £0 £ start-up
2 Founders invested sufficient personal equity to
demonstrate to external investors they were
£300,000 £50,000 £1,800,000 U committed to the new venture
3 Parents invested in the new venture, and this helped
secure a bank loan – a form of “proxy” signalling
£0 £220,000 £0 £ through the wider kinship group?
4 Founder’s investment secured in initial round of loan
£30,000 £98,000 £0 U financing
5 Larger personal investment secured smaller bank
£40,000 £15,000 £0 U loan
6 Initial bank reluctance to lend despite founder
investment led to overdraft that was then
£85,000 £220,000 £0 £ augmented/part-converted into a loan
7 Invested own funds, but only a small amount and so
£6,000 £35,000 £0 £ was not able to secure a bank loan without guarantee
8 £21,000 £5,000 £0 U Own funds leveraged bank loan
9 £0 £31,000 £0 £ No personal funds invested
10 Own funds leveraged bank loan, which then was
£5,000 £55,000 £100,000 U augmented with venture capital
11 £4,000 £1,500 £0 U Own funds “topped up” with non-bank loan
12 £0 £1,000 £0 £ No personal funds invested, small loan
13 £1,500 £2,500 £0 U Own funds combined with non-bank loan
14 £2,000 £0 £100,000 U Founder invested, and IP, attracted US VC
15 £0 £2,500 £0 £ No personal funds invested
16 £4,000 £5,000 £0 U Own funds “matched” against bank loan
17 £1,000 £0 £0 £ No external funding
18 Bank not willing to provide loan, and so offered
£8,000 £10,000 £0 £ overdraft instead
19 £0 £20,000 £0 £ No personal funds invested
20 £10,000 £0 £0 £ No external funding
new venture and in particular the potential future risk of repayment and liability that Cases of start-up
external borrowing and investment may produce. Business 17 relied solely on their financing
own funds as the only source of start-up funding, and business 20 combined a small
personal investment with a small grant and funding from a matching government
grant (Enterprise Allowance Scheme). These two founders could be characterised as
averse to securing external funding that they may need to repay in the future even if
the new venture does not succeed, which can in turn be taken as a “signal” of a lack of 41
confidence in the ventures they were starting.

Data discussion
The three most common forms of finance across the 20 cases were grants, external debt
and informal finance, with all three being used extensively by most new ventures
within the sample. Overdraft facilities were less common than loans, indicating greater
levels of acquisition of longer-term lending than shorter-term credit. Grants were used
most extensively (24 times across 15 of the 20 cases). However, their total value was
low and their overall significance to total capitalisation was high in only two cases
(12 and 17, both of which had amongst the lowest total capitalisation values in the
sample). Although venture capital investment (equity) accounted for almost half the
total start-up capitalisation value for all 20 businesses, this form of finance was
acquired by only three businesses. Almost all ventures acquired “bundles” of multiple
forms of start-up financing from different sources, and there was some indication that
more capitalised new ventures used a wider range of financing options that extended
beyond loans and grants to include overdraft credit, formal venture capital investment,
hire purchasing and leasing. Across the sample, therefore, the most significant forms of
start-up funding, when value and frequency of acquisition were both considered, were
externally acquired debt and personal funds.
Research question 1 explored the extent to which new venture financing patterns
confirmed either debt-equity trade-offs or pecking order sequences. Across the sample,
there was no clear or definitive alignment of financing patterns with either debt-equity
trade-off configurations or pecking order sequences; even though some new ventures
did follow these patterns. Instead, the key observation arising from the analysis is that
patterns of start-up financing varied widely from new venture to new venture, in terms
of multiple parameters including: total capitalisation value at start-up; types and
sources of finance acquired; numbers of financing transactions undertaken; numbers of
financing sources used; average values of each transaction; nature and structure of
financing “bundles” acquired.
As per research question 2, there was greater use of external debt than equity across
the sample, even though the value of equity was particularly significant for a small
number of start-ups. Internal finance was not used (research question 3), as the firms
were not yet trading, and there was little use of informal, bootstrap and intermediary
funding (research question 4). This latter finding is somewhat surprising, given the
incidence of bootstrap finance cited in many studies, and this may reflect the nature of
this sample of new ventures, which were referred by business support agencies and so
can be assumed to be more likely to use formal sources of finance as well as their own
funds. This supports research question 5, which suggests the importance of own
savings and funds from close family and friends as a starting point for funding
business start-up.
IJEBR Conclusions and implications
18,1 These findings indicate that the underpinning assumptions of debt-equity trade-off
theorisations of financing do not apply universally to the new ventures examined in
this paper. Instead, this paper has found multiple cases where new ventures are funded
by equity alone, or by a combination of equity and grants, i.e. instances where there is
no evidence of debt-equity trade-offs because no debt has been acquired to finance
42 business start-up. Pecking order theorisations do not appear to apply fully to the
sample either. Firstly, none of the cases used internal funds, i.e. retained earnings, to
finance new venture creation, reflecting their lack of trading history. This indicated
that pecking order approaches are internally, as well as externally “constrained” or
“truncated” (Howorth, 2001). In other words, even though new firm founders may
prefer internal finance in the first instance, their lack of trading history removes this
funding option. Secondly, shorter-term debt in the form of bank overdraft was used
less than longer-term loan debt: only five instances of bank credit through overdraft
were reported, compared with ten instances of commercial lending and seven
guaranteed loans. A preference for short-term over long-term debt (Howorth, 2001,
p. 79) was not evident in this sample. The extensive use of loan guarantee debt funding
suggests that public intervention, particularly through the Small Firms Loan
Guarantee Scheme, has provided access to external debt on quasi-commercial terms
that may not have been available on a commercial basis.
Overall, therefore, there were no common or clear debt-equity distributions across
the sample. Instead, there was noticeable variation in financing patterns within the
sample. The scale and nature of start-up funding was also highly variable, with
significantly different capitalisation structures and values evident across the sample.
These variations in new venture capitalisation highlight two important themes that
may inform our thinking on how founders finance their new ventures. The first is the
extent to which many of the new ventures were started with low levels of capital, and
so with the prospect that they are likely to be under-capitalised and, as a result,
vulnerable to pressures such as lack of investment funding for staff, equipment and
business development as well as a greater risk of cash flow problems once trading.
This suggests that many new ventures are started without sufficient capitalisation and
so will be more likely to grow more slowly as well as being more vulnerable to closure.
Conversely, a greater propensity to use more and a wider variety of types of finance
can be seen in new ventures with higher capitalisation. This appears to be influenced
by the founder’s understanding of funding options, i.e. their overall “financial literacy”
in relation to resourcing business start-up, and their aspirations for the new venture;
with more “financially literate” and more ambitious founders generating higher levels
of start-up funding from a wider range of sources and types of finance. This suggests
in turn that prospects for survival and growth once a new venture is created are
influenced by the capability of the founder to start a well-resourced new venture with
future growth ambitions, i.e. to establish larger-scale, more growth-focused new
ventures (as measured by capitalisation).
However, the financial “literacy” of the founder in gauging the funding needs of a
new venture and that founder’s ability to secure these resources and apply them to
growing the business did not provide a definitive account of the drivers for securing
new venture finance across the sample. A pattern of incremental “bundling” of various
forms of finance across all but one case attests to this in several ways. For many of the
new ventures, a single source of finance did not provide all the funding the founder was Cases of start-up
seeking, so forcing them to either start the venture under-capitalised – as happened in financing
several cases – or to seek the outstanding financing need from other sources. In some
cases, such as business 6, an external funder was reluctant to lend the full amount
sought by the founder because the start-up was informationally “opaque” as a result of
it being unproven and having no track record in trading profitably. In addition,
funding was secured in bouts, or waves, initially as the founder was planning the new 43
venture’s future establishment and was still exploring how this would be achieved and
seeking to understand how the new venture would operate. As the founder moved
through planning to launch of the new venture, unanticipated additional costs were
often identified or discovered, so demanding more funding and a need to seek out
additional sources of start-up finance. This was particularly the case for
technologically-focused new ventures seeking to mass produce or commercialise
proprietary knowledge or technology (cases 5, 8, 10, 14). An additional reason for
incremental raising of start-up finance was a desire by the founder to not become
overly dependent upon a single source of funding. In these cases, multiple forms of
finance were sought from different providers (venture 2 acquired funding from two
different venture capitalists when either would have funded the full value sought).
Incremental acquisition of start-up finance also occurred because of what could be
termed “cumulative incrementalism”, where personal funding was used initially to
secure or “match” against other forms of finance. Over time, several new venture
founders accumulated larger financing “bundles”, and deployed these enhanced
capitalisation values to secure further external finance (businesses 10 and 14 acquired
loans against founder equity initially, and then approached venture capitalists to
secure further funding once a first “bundle” of funding was in place).
Combined, these various factors suggest that start-up capitalisation values and
structures are influenced by a variety of factors, as follows:
(1) The overall ability of the founder(s) in terms of their:
.
financial literacy;
.
success in negotiating to acquire funding; and
.
expertise in planning business start-up and launch effectively.
(2) The financial constraints experienced by most new ventures, in particular how
funders respond to and deal with:
.
the opacity of a new and as yet unproven new venture; and
. the additional risk associated with funding new and unproven ventures.
(3) The incremental and unpredictable dynamics of starting a new business, in
particular the:
.
uncertainty generated by iterative development of the new venture; and
. experiential learning of the founder as he/she deals with this iterative
uncertainty in business start-up.

References
Alsos, G., Isaksen, E. and Ljunggren, A. (2006), “New venture financing and subsequent business
growth in men- and women-led businesses”, Entrepreneurship: Theory and Practice,
Vol. 30 No. 5, pp. 667-87.
IJEBR Ang, J. (1992a), “Small business uniqueness and the theory of financial management”, Journal of
Small Business Finance, Vol. 1 No. 1, pp. 1-13.
18,1
Ang, J. (1992b), “On the theory of finance for small privately held firms”, Journal of Small
Business Finance, Vol. 1 No. 3, pp. 185-203.
Atherton, A. (2009), “Rational actors, knowledgeable agents: extending pecking order
considerations of new venture financing to incorporate founder experience, knowledge
44 and networks”, International Small Business Journal, Vol. 27 No. 4, pp. 470-95.
Atherton, A. and Hannon, P. (2000), “Innovation processes and the small business: a conceptual
analysis”, International Journal of Business Performance Management, Vol. 2 No. 4,
pp. 276-92.
Bank of England (2003), Finance for Small Firms – A Tenth Report, Bank of England, London.
Bank of England (2004), Finance for Small Firms – An Eleventh Report, Bank of England,
London.
Basu, A. and Parker, S. (2001), “Family finance and new business start-ups”, Oxford Bulletin of
Economics and Statistics, Vol. 63 No. 3, pp. 333-58.
Berger, A. and Udell, G. (1998), “The economics of small business finance: the roles of private
equity and debt markets in the financial growth cycle”, Journal of Banking and Finance,
Vol. 22 Nos 6-8, pp. 613-73.
Berggren, B., Oloffson, C. and Silver, L. (2000), “Control aversion and the search for external
financing in Swedish SMEs”, Small Business Economics, Vol. 15 No. 3, pp. 233-42.
Bhide, A. (1992), “Bootstrap finance: the art of start-ups”, Harvard Business Review, Vol. 70,
November-December, pp. 109-17.
Binks, M. and Ennew, C. (1996), “Growing firms and the credit constraint”, Small Business
Economics, Vol. 8 No. 1, pp. 17-25.
Binks, M., Ennew, C. and Reed, G. (1992), “Information asymmetries and the provision of finance
to small firms”, International Small Business Journal, Vol. 11 No. 1, pp. 35-46.
Bolton Report (1971), Report of the Committee of Enquiry on Small Firms, HMSO, London.
Carter, R. and van Auken, H. (2005), “Bootstrap financing and owners’ perceptions of their
business constraints and opportunities”, Entrepreneurship and Regional Development,
Vol. 17 No. 2, pp. 129-44.
Cassar, G. (2004), “The financing of business start-ups”, Journal of Business Venturing, Vol. 19
No. 2, pp. 261-84.
Chaganti, R., deCarolis, D. and Deeds, D. (1995), “Predictors of capital structure in small
ventures”, Entrepreneurship Theory and Practice, Vol. 20 No. 1, pp. 7-18.
Chandler, G. and Hanks, S. (1998), “An examination of the substitutability of founders’ human
and financial capital in emerging business ventures”, Journal of Business Venturing,
Vol. 13 No. 5, pp. 353-69.
Chetty, S. (1996), “The case study method for research in small- and medium-sized firms”,
International Small Business Journal, Vol. 15 No. 1, pp. 73-86.
Chittenden, F., Hall, G. and Hutchinson, P. (1996), “Small firm growth, access to capital markets
and financial structure: review of issues and empirical investigation”, Small Business
Economics, Vol. 8 No. 1, pp. 59-67.
Coleman, S. and Cohn, R. (1999), “Small firms’ use of financial leverage: evidence from the 1993
national survey of small business finances”, Frontiers of Entrepreneurship Research 1999,
available at: www.babson.edu/entrep/fer/papers99
Cressy, R. (1996), “Are business start-ups debt-rationed?”, The Economic Journal, Vol. 106, Cases of start-up
September, pp. 1253-70.
Dwyer, H. and Lynn, R. (1989), “Small capitalization companies: what does financial analysis tell
financing
us about them?”, The Financial Review, Vol. 24 No. 3, pp. 397-415.
Ebben, J. (2007), “Bootstrapping and the financial condition of small firms”, International Journal
of Entrepreneurial Behaviour and Research, Vol. 15 No. 4, pp. 346-63.
Ebben, J. and Johnson, A. (2006), “Bootstrapping in small firms: an empirical analysis of change 45
over time”, Journal of Business Venturing, Vol. 21 No. 6, pp. 851-65.
EC (2003), Green Paper on Entrepreneurship in Europe, COM (2003) 27 Final, European
Commission, Brussels.
Eisenhardt, K. (1989), “Building theories from case study research”, Academy of Management
Review, Vol. 14 No. 4, pp. 532-50.
Gibson, B. (1992), “Financial information for decision-making: an alternative small firm
perspective”, Journal of Small Business Finance, Vol. 1, pp. 221-32.
Hall, G., Hutchinson, P. and Michaelas, N. (2004), “Determinants of the capital structures of
European SMEs”, Journal of Business Finance and Accounting, Vol. 31 Nos 5/6, pp. 711-28.
Hamilton, R. and Fox, M. (1998), “The financing preferences of small firm owners”, International
Journal of Entrepreneurial Behaviour and Research, Vol. 4 No. 3, pp. 239-48.
Harding, R. and Cowling, M. (2006), “Assessing the scale of the equity gap”, Journal of Small
Business and Enterprise Development, Vol. 13 No. 1, pp. 115-32.
Harrison, R., Mason, C. and Girling, P. (2004), “Financial bootstrapping and venture development
in the software industry”, Enterprise and Regional Development, Vol. 16 No. 2, pp. 307-33.
Holmes, S. and Kent, P. (1991), “An empirical analysis of the financial structure of small and
large Australian manufacturing enterprises”, Journal of Small Business Finance, Vol. 1
No. 2, pp. 141-54.
Howorth, C. (2001), “Small firms’ demand for finance: a research note”, International Small
Business Journal, Vol. 19 No. 4, pp. 78-86.
Hughes, A. (1997), “Finance for SMEs: a UK perspective”, Small Business Economics, Vol. 9 No. 2,
pp. 151-66.
Hughes, A. and Storey, D. (1994), Finance and the Small Firm, Routledge, London.
Jones, O. and Jayawarna, D. (2010), “Resourcing new business: social networks, bootstrapping
and firm performance”, Venture Capital, Vol. 12 No. 2, pp. 127-52.
Jordan, J., Lowe, J. and Taylor, P. (1998), “Strategy and financial policy in UK small firms”,
Journal of Business Finance and Accounting, Vol. 25 Nos 1/2, pp. 1-27.
Kon, Y. and Storey, D. (2003), “A theory of discouraged borrowers”, Small Business Economics,
Vol. 21 No. 1, pp. 37-49.
Kuratko, D., Hornsby, J. and Naffziger, D. (1997), “An examination of owner’s goals in sustaining
entrepreneurship”, Journal of Small Business Management, Vol. 35 No. 1, pp. 24-33.
Lam, W. (2010), “Funding gap, what funding gap? Financial bootstrapping: supply, demand and
creation of entrepreneurial finance”, International Journal of Entrepreneurial Behaviour
and Research, Vol. 16 No. 4, pp. 268-95.
Landstrom, H. and Winborg, J. (1995), “Small business managers’ attitudes towards and use of
financial sources”, Frontiers of Entrepreneurship Research 1995 Edition, Babson College,
Boston, MA, available at: www.babson.edu/entrep/fer/papers95/landstr.htm
Lopez-Gracia, J. and Aybar-Arias, C. (2000), “An empirical approach to the financial behaviour of
small and medium sized companies”, Small Business Economics, Vol. 14 No. 1, pp. 55-63.
IJEBR Mason, C. and Harrison, R. (1996), “Business angel networks and the development of the informal
venture capital market in the UK: is there still a role for the public sector?”, Small Business
18,1 Economics, Vol. 9 No. 2, pp. 111-23.
Modigliani, F. and Miller, M. (1958), “The cost of capital, corporation finance and the theory of
investment”, American Economic Review, Vol. 48 No. 3, pp. 261-97.
Myers, S. (1984), “The capital structure puzzle”, Journal of Finance, Vol. 39 No. 3, pp. 575-92.
46 Myers, S. and Majluf, N. (1984), “Corporate financing and investment decisions when firms have
information that investors do not have”, Journal of Financial Economics, Vol. 13 No. 2,
pp. 187-222.
Norton, E. (1991), “Capital structure and small growth firms”, Journal of Small Business Finance,
Vol. 1 No. 2, pp. 161-77.
Organisation for Economic Cooperation and Development (OECD) (1998), Fostering
Entrepreneurship, OECD, Paris.
Parker, S. (2002), “Do banks ration credit to new enterprises? And should governments
intervene?”, Scottish Journal of Political Economy, Vol. 49 No. 2, pp. 162-95.
Paul, S., Whittam, G. and Wyper, J. (2007), “The pecking order hypothesis: does it apply to
start-up firms?”, Journal of Small Business and Enterprise Development, Vol. 14 No. 1,
pp. 8-21.
Perren, L. and Ram, M. (2004), “Case-study method in small business and entrepreneurial
research: mapping boundaries and perspectives”, International Small Business Journal,
Vol. 22 No. 1, pp. 83-92.
Petty, J. and Bygrave, W. (1993), “What does finance have to say to the entrepreneur?”, Journal of
Small Business Finance, Vol. 2 No. 2, pp. 125-37.
Prasad, D., Bruton, G. and Vozikis, G. (2000), “Signaling value to business angels: the proportion
of the entrepreneur’s net worth invested in a new venture as a decision signal”, Venture
Capital, Vol. 2 No. 3, pp. 167-82.
Reid, G. (1996), “Financial structure and the growing small firm: theoretical underpinning and
current evidence”, Small Business Economics, Vol. 14 No. 3, pp. 165-82.
Reid, G. (2003), “Trajectories of small business financial structure”, Small Business Economics,
Vol. 20 No. 4, pp. 273-85.
Rod, M. (2006), “An innovative biotechnology start-up company approach”, International Journal
of Entrepreneurship and Innovation, Vol. 7 No. 2, pp. 99-103.
Romano, C. (1989), “Research strategies for small business: a case study approach”, International
Small Business Journal, Vol. 12 No. 2, pp. 101-11.
Sjogren, H. and Zackrisson, M. (2005), “The search for competent capital: financing of high
technology small firms in Sweden and USA”, Venture Capital, Vol. 7 No. 1, pp. 75-97.
Smallbone, D., Ram, M., Deakins, D. and Baldock, R. (2003), “Access to finance by ethnic minority
businesses in the UK”, International Small Business Journal, Vol. 21 No. 3, pp. 291-314.
Storey, D. (1994), Understanding the Small Business Sector, Routledge, London.
Titman, S. and Wessels, R. (1988), “The determinants of capital structure choice”, The Journal of
Finance, Vol. 18 No. 1, pp. 1-19.
Uusitalo, R. (2001), “Homo entreprenaurus?”, Applied Economics, Vol. 33 No. 13, pp. 1631-8.
van Auken, H. (2005), “Differences in the use of bootstrap financing among technology-based
versus nontechnology-based firms”, Journal of Small Business Management, Vol. 43 No. 1,
pp. 93-103.
van Auken, H. and Carter, R. (1989), “Acquisition of capital by small businesses”, Journal of Cases of start-up
Small Business Management, Vol. 27 No. 1, pp. 1-29.
van Auken, H. and Neeley, L. (1996), “Evidence of bootstrap financing among small start-up
financing
firms”, Journal of Entrepreneurial and Small Business Finance, Vol. 5 No. 3, pp. 235-50.
Verheul, I. and Thurik, R. (2001), “Start-up capital: does gender matter?”, Small Business
Economics, Vol. 16 No. 4, pp. 329-46.
Vinnell, R. and Hamilton, R. (1999), “A historical perspective on small firm development”, 47
Entrepreneurship Theory and Practice, Vol. 23 No. 4, pp. 5-18.
Watson, R. and Wilson, N. (2002), “Small and medium size enterprise financing: a note on some of
the empirical implications of a pecking order”, Vol. 29 Nos 3/4, pp. 557-78.
Yin, R. (1989), Case Study Research, Sage, Beverley Hills, CA.

About the author

Andrew Atherton is Professor of Enterprise and Entrepreneurship and Senior Deputy Vice
Chancellor at the University of Lincoln. At Lincoln, he established the Enterprise Research and
Development Unit (ERDU), which has undertaken more than 30 commissioned policy studies
since 2003. Before joining Lincoln, he was Director of the Foundation for SME Development at
the University of Durham, the successor department to the Small Business Centre, a leading
international centre for enterprise and SME development. While at Durham, he established the
Policy Research Unit, which undertook commissioned research and policy analysis on enterprise
development and entrepreneurship. He has degrees in Chinese and Economics from the School of
Oriental and African Studies, University of London, and Yale University. His current research is
concerned with enterprise policy, entrepreneurship in China, and new venture creation. Andrew
Atherton can be contacted at: aatherton@lincoln.ac.uk

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com

Or visit our web site for further details: www.emeraldinsight.com/reprints