The Role of Speedier Public Funding for Small High-Tech Firms

We exploit a unique programmatic shift in the U.S. Small Business Administration’s small business technology seed funding programs to investigate whether shorter time periods between proof-of concept and seed stages in public venture capital (VC) allow firms to achieve greater technology and financial milestones. Our paper is motivated by an observation made by founders that federal funding is too slow. Through a series of two-way fixed effects regression models the sample of National Institutes of Health (NIH) recipient firms, we find that faster public VC leaders to greater technology outcomes on some metrics, but not all. Next, by exploiting exogenous variation in state match programs, we show that these results also are magnified by windfall state funding. Our findings have practical implications for policymakers and for entrepreneurial strategy. We contribute to the literatures on innovation policy, the federal SBIR/STTR programs, and provide new understanding of the role of timing in public venture finance and entrepreneurial strategy.