The interaction between product market and financing strategy: the role of venture capital

Venture capital financing is widely believed to be influentialfor new innovative companies. We provide empirical evidencethat venture capital financing is related to product marketstrategies and outcomes of start-ups. Using a unique hand-collecteddatabase of Silicon Valley high-tech start-ups. Using a uniquehand-collected database of Silicon Valley high-tech start-upswe find that innovator firms are more likely to obtain venturecapital than imitator firms. Venture capital is also associatedwith a significant reduction in the time to bring a productto market, especially for innovators. Our results suggest significantinterrelations between investor types and product market dimensions,and a role of venture capital for innovative companies.