The role of accelerator programmes on the capital structure of start-ups

Several factors affect the capital structure of start-ups. In this study, we compare the capital structure choices of accelerated and non-accelerated start-ups to evaluate the role of accelerated programmes on the capital structure decisions for start-ups. Using a comprehensive database provided by Emory University, we find that accelerated start-ups have higher external equity ratios than non-accelerated start-ups, after accounting for firm-specific differences and unobserved start-ups factors, particularly when the economic conditions deteriorate. We also confirm that accelerated start-ups raise more funding through philanthropic investors, but this effect disappears when we control for firm fixed effects. These results suggest that accelerators provide informative signals about the quality of the venture, albeit only to external equity investors, and particularly during recession periods. Our findings have implications for a better understanding of the role of asymmetric information and business cycles in capital structure decisions for accelerated start-ups.