This study investigates how serial entrepreneurs' prior founding experience affects their capacity to raise seed capital in subsequent ventures, integrating entrepreneurial learning and signaling theories. Specifically, it first examines the non-linear effects of prior founding experiences and then distinguishes their quality in terms of success and failure.
This study analyses data on startup founders from the Korean Startup Survey. The dependent variable is seed capital, while the main independent variables are serial founding experience for all founders and success and failure experience for serial founders. Robustness is checked using supplementary analyses.
Prior founding success and failure experiences have positive effects on seed capital but only after repeated iterations (a non-monotonic but stepwise effect). To gain a positive effect from experience, entrepreneurs require more iterations of failure than of success.
This study challenges existing evidence that the amount of seed capital secured by founders increases linearly with prior founding experience. The signaling effect of entrepreneurial capability is not immediate but emerges only after entrepreneurial learning dynamics from success and failure occur. Learning from repeated failures is more challenging in seed-stage financing than learning from accumulated success experiences.
This study uniquely identifies a sweet spot in the relationship between the quantity and quality of prior founding experience and the capacity to raise seed capital. In doing so, it contrasts with and complements existing studies showing a linear effect of serial entrepreneurship on venture capital financing.
