Paper ID
3440
Paper Type
full
Description
Startups are increasingly using social media to signal quality and provide information for potential investors. However, the effectiveness of social media is likely to be heterogeneous between different demographic and network characteristics. In this paper, we examine whether social media use can alleviate disadvantages of female founded firms and by firms at the periphery of the investor network. Using social media activity data on Twitter and venture capital investment data of startups on Crunchbase, we show that social media can mitigate some biases against women-founded firms and in firms with low social capital in the investor network. This is because social media can provide new channels for information access and quality signals, allowing disadvantaged companies to share information with investors about products and services. We find this effect is salient in competitive markets where venture financing is harder to obtain, and for new entrants as opposed to experienced entrepreneurs.
Recommended Citation
Wang, Xiaoning and Wu, Lynn, "Can Social Media Alleviate Inequalities? Evidence from Venture Capital Financing" (2019). ICIS 2019 Proceedings. 16.
https://aisel.aisnet.org/icis2019/innov_entre/innov_entre/16
Can Social Media Alleviate Inequalities? Evidence from Venture Capital Financing
Startups are increasingly using social media to signal quality and provide information for potential investors. However, the effectiveness of social media is likely to be heterogeneous between different demographic and network characteristics. In this paper, we examine whether social media use can alleviate disadvantages of female founded firms and by firms at the periphery of the investor network. Using social media activity data on Twitter and venture capital investment data of startups on Crunchbase, we show that social media can mitigate some biases against women-founded firms and in firms with low social capital in the investor network. This is because social media can provide new channels for information access and quality signals, allowing disadvantaged companies to share information with investors about products and services. We find this effect is salient in competitive markets where venture financing is harder to obtain, and for new entrants as opposed to experienced entrepreneurs.