More Money, More Problems? A Meta-analytic Review of the Curvilinear Effect of Early Financial Resources on New Firm Performance

New ventures need sufficient early financial resources to survive and grow. Early financial resources are critical to new firms successfully discovering and exploiting new market opportunities, finding product market fit through experimentation as well as absorbing external shocks and overcoming the liability of newness. But increased early financial resources comes with challenges. First it has been acknowledged that financial assets contribute less to a sustained competitive advantage than intangible assets because they are more widely accessible and replicable. Furthermore, higher early financial resources may convert into financial slack which induces strategic and structural mismatches with the environment that increase inefficiency. Financial slack also negatively impacts key dimensions of entrepreneurial management, and in turn growth performance. Finally, substantial early financial resources are typically mobilized beyond the founders, friends and family. They are raised from external stakeholders (typically venture capitalists or banks) which will reduce managerial discretion due to agency concerns about opportunism.