Survival of Platform-based Startups: A Quantitative Investigation of how Funding Influences the Survival of Platform-based Startups

Nema Hosainzadeh

Student thesis: Master thesis

Abstract

Despite their disruptive strengths of strong network effects and scalability, many platform startups still fail within their startup phase. Studies show how platform survival is largely influenced by their complex digital nature, creating managerial difficulties for platform entrepreneurs. However, not a lot of research has taken a step back and evaluated the fundamental influence of funding on the survival of platforms in their earliest startup stage where funding is known to be crucial in new ventures. Thus, platform entrepreneurs are left unknowing whether their focus should be solely on the complex dynamics unique to platforms, or if funding remains one of the most important aspects of the startup stage. Thus, this study aims to investigate how quantitative funding-related factors influence the survival of platformbased startup survival, as well as the relationship between founder capabilities (entrepreneurial experience and knowledge) and funding attraction. To investigate this, the research utilizes data from CrunchBase, an opensource community-generated database on innovative tech companies. The collected dataset is quantitatively analyzed primarily by applying a causal relationship framework through a survival regression model, known as the Cox proportional hazards model, to find how factors from the dataset influences survival probabilities of platform-based startups. The research shows a significant positive relationship between funding and survival probabilities of platformbased startups, except for the number of investors, which has a negative impact if too large. However, due to statistical insignificance, no confident relationship between founder capabilities and survival is found. It is however found that a moderate positive relationship between founder capabilities and the attraction of funding exists in platform-based startups. Consequently, managers and founders of platform-based startups are advised to focus on attracting as much funding as possible, but from hands-on investors with great experience and knowledge that can increase survival probabilities by supplementing strategic capabilities where the founders are lacking.

EducationsMSc in Business Administration and E-business, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2021
Number of pages97
SupervisorsDaniel F├╝rstenau