Auditioning for External Capital - Entrepreneurs' use of impression management to meet investors' expectations

Abstract: The aim of this thesis is to present a more comprehensive view on the relationship between entrepreneurs and venture capital (VC) investors. By drawing upon a multiple case study with entrepreneurs, our study adds to the existing literature by providing a much-needed entrepreneurial perspective. Building upon Goffman's (1959) dramaturgical framework, we investigate how entrepreneurs of different backgrounds use techniques of impression management and idealisation in their attempt to manage the expectations of investors. Our study contributes to the literature on the entrepreneur-investor relationship in several ways. Firstly, it provides insights on how idealisation takes different shapes depending on the identity of the entrepreneurs. Our findings show that entrepreneurs with a business background tend to idealise the financial aspect of their business model, by putting emphasis on financial projections connected to the use of KPIs. In contrast to this, those with a technical background show reluctance towards the use of accounting, and instead idealise their entrepreneurial narrative. Secondly, we have identified a tension that entrepreneurs experience as they involuntarily participate in the institutionalised norms of the start-up world. In particular, this relates to the myth of a 10x return expectation, which forces entrepreneurs to make assumptions they cannot stand behind. Thus, it is shown how the expectations from investors are perceived differently based on belief of identity. Thirdly, this study provides insights on the role and emergence of accounting in start-ups, by providing evidence that accounting plays an important part as an impression management device that entrepreneurs use to legitimise their business.