The use of financial bootstrapping in small and medium-sized ventures and the impact on venture growth

Abstract

It is well documented that the availability of financial resources is one of the challenges of new venture creation. In order to overcome these challenges, it is necessary and desirable that founders are aware of methods that minimize the need for financing by securing resources at little or no cost, and by creatively acquiring resources without using bank financing or equity. This collective set of methods is called financial bootstrapping. Despite the fact that the use of some bootstrap methods in actual practice is widespread, there is a lack of research focusing on developing an understanding of financial bootstrapping use in new ventures. In this study, we analyse which human capital characteristics of the owner-manager have an impact on this use. A second goal is to assess whether and to pinpoint which financial bootstrapping types affect the venture's growth.