Beefing IT up for your Investor? Open Sourcing and Startup Funding: Evidence from GitHub

Strategy & Business Policy

Speaker: Annamaria CONTI

Associate Professor of Strategy

University of Lausanne

HEC Campus Jouy-en Josas

Abstract

We study the participation of nascent firms in open-source communities and its implications for attracting VC funding. To do so, we exploit unique data on 160,065 US startups linking information from Crunchbase to firms’ GitHub accounts. Estimating a within-startup model saturated with a host of relevant fixed effects, we show that startups accelerate their activities on the platform in the twelve months prior to raising their first financing round. The intensity of their involvement on GitHub declines in the twelve months after. Remarkably, startups intensify those activities that rely on external technology sources above and beyond the technologies they themselves control. Applying machine learning to classify GitHub projects, we find that the most prevalent among these external activities are related to software development, data analytics, and integration. Our results indicate that VCs and renowned investors are the most responsive to these activities.

Keywords: Startups, Technology Strategy, GitHub, Machine Learning, Venture Capital