The interaction between product market and financing strategy: The role ofventure capital

Venture capital financing is widely believed to be influential for new inno vative companies. We provide empirical evidence that venture capital financ ing is related to product market strategies and outcomes of start-ups. Usin g a unique hand-collected database of Silicon Valley high-tech start-ups we find that innovator firms are more likely to obtain venture capital than i mitator firms. Venture capital is also associated with a significant reduct ion in the time to bring a product to market, especially for innovators. Ou r results suggest significant interrelations between investor types and pro duct market dimensions, and a role of venture capital for innovative compan ies.