Certification or Cash Prize: The Heterogeneous Effect of Venture Competitions
Event details
| Date | 11.02.2021 |
| Hour | 17:00 |
| Speaker | Matthias van den Heuvel (EPFL) |
| Location |
Zoom
|
| Category | Conferences - Seminars |
Matthias van den Heuvel (EPFL)
"Certification or Cash Prize: The Heterogeneous Effect of Venture Competitions"
Discussant: Michael Ewens (Caltech)
Abstract
Venture competitions usually reward winners with a certification of their startup’s quality and a cash prize. We model and estimate the impact of these rewards on startup performances using original data on about 1000 startups that have participated in a highly-regarded venture competition. We find that winning in the competition improves startups' performances on average. However, it does not affect all technology types equally. Startups in sectors where quality can be more objectively assessed enjoy a long-term benefit from the certification's effect. By contrast, startups with low running costs and whose quality is harder to evaluate only benefit temporarily from having received a cash prize, with no long-term effect. We also show that the competition's certification provides valuable information to both entrepreneurs and outside investors. This information accelerates the termination of low-quality startups and improves external funding opportunities for high-quality startups. Our results highlight sector-specific heterogeneity in startups early-stage support needs, which bears implications for the design of entrepreneurial programs.
EPFL Virtual Innovation Seminar
EVIS is a bi-weekly virtual seminar series focusing on Science, Technology and Innovation topics studied through the lens of Economics, Entrepreneurship, Strategy and Finance.
"Certification or Cash Prize: The Heterogeneous Effect of Venture Competitions"
Discussant: Michael Ewens (Caltech)
Abstract
Venture competitions usually reward winners with a certification of their startup’s quality and a cash prize. We model and estimate the impact of these rewards on startup performances using original data on about 1000 startups that have participated in a highly-regarded venture competition. We find that winning in the competition improves startups' performances on average. However, it does not affect all technology types equally. Startups in sectors where quality can be more objectively assessed enjoy a long-term benefit from the certification's effect. By contrast, startups with low running costs and whose quality is harder to evaluate only benefit temporarily from having received a cash prize, with no long-term effect. We also show that the competition's certification provides valuable information to both entrepreneurs and outside investors. This information accelerates the termination of low-quality startups and improves external funding opportunities for high-quality startups. Our results highlight sector-specific heterogeneity in startups early-stage support needs, which bears implications for the design of entrepreneurial programs.
EPFL Virtual Innovation Seminar
EVIS is a bi-weekly virtual seminar series focusing on Science, Technology and Innovation topics studied through the lens of Economics, Entrepreneurship, Strategy and Finance.
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- General public
- Free