ABSTRACT
Selecting the right financing source for a new business is a key driver of success. This is especially true for entrepreneurial firms with innovative ideas and high growth potential because significant financial investments are needed to secure their growth. For innovative start-ups, financing decisions in the early stage can significantly affect future prospects (Cassar 2004; Schwienbacher 2013). Critically, firms at their initial stage of development – especially at the time of creation – face greater difficulties in raising external capital than established firms because of more severe problems of information asymmetry (lack of a track record), agency costs and transaction costs (Cassar 2004).
