Too Much of Two Good Things: Effects of Founders' Educational Level and Heterogeneity on Start-Up Funds Raised

The success of early-stage start-ups is strongly dependent on founders' education. Yet, while scholars maintain that investors should consider founders' education an important signal of start-ups' prospects, mixed empirical findings suggest that more education does not always trigger positive investor reactions. Scholars have thus urged the development of new theoretical insights that may explain why and when education is beneficial to start-ups' emergence. Based on cognitive and social psychology literature, in this article, we evidence that different configurations of founders' education affect the ability of founding teams to obtain funding. The empirical support that we obtained from a sample of 1078 start-ups helps reconcile the contradictory findings of past research through a joint examination of two dimensions of founders' education that were previously only investigated separately - the level of education and the heterogeneity of educational backgrounds. Our focus on the group dynamics founding teams advances our understanding of the contribution of founders' education onto early-stage start-ups' fund raising. In greater detail, educational level and educational heterogeneity positively affect the amount of funds raised, but their joint presence negatively moderates such a relationship. In doing so, we also provide start-uppers and policymakers with important information regarding how cofounders should group together when launching a start-up.