Is Media Coverage Beneficial for Startups?

Aymeric Bellon, Finance, The Wharton School, and Tong Liu, Finance, The Wharton School

Abstract: Is media coverage beneficial for startup to obtain funding from VCs? What factors would affect startups to strategically transmit information through media? We would like to study the role of communication through mass media outlets, like newspapers, in the setting of venture capital and entrepreneurial firms. Media coverage has an ambiguous effect on the future performance of entrepreneurial firms. Media exposure grabs both the attention of potential consumers-which could expand the potential market-and VCs, which increases the likelihood to obtain more offers from venture capital. Therefore, it is supposed to increase the bargaining power of startups. However, more media exposure increases the risk that core ideas/business models that startups exclusively rely on would be stolen by followers or competitors in the market, which would leave the entrepreneurial firm in a disadvantaged position. The aim of this project is to quantify this trade-off when entrepreneurial firms are trying to obtain investment from VCs for the first time using an instrumental variable approach.

Michelle Eckert is Marketing and Communications Coordinator for the Mack Institute, where she works to engage students, researchers, and corporate partners in opportunities for collaboration. Michelle received her B.A. in Art from Valparaiso University in 2007. Her background includes two AmeriCorps terms of service working to teach mathematics, computer literacy, and job readiness skills to out-of-school youth in Philadelphia, focusing particularly on promoting access to post-secondary education.