Construed Shared Expectations: Facilitating Access to Early-Stage Equity Financing in Developing Countries

This chapter aims to understand how “disconnected entrepreneurs” access early-stage financing in non-developed countries. Previous studies have pointed out that due to the weak institutional environment in such contexts, investors have had to replace formal institutions with networks and other informal institutions. For this reason, connections and trust are particularly relevant for accessing entrepreneurial funding in non-developed countries. However, previous research has not explained how disconnected entrepreneurs from the lower social classes generate such trust and connections with business angels (BAs). The grounded theory method was used to analyze 33 semi-structured interviews with Central American actors related to entrepreneurial financing. Based on the grounded evidence and the social capital dimensions framework, the study proposes a model explaining how former investors, businesspersons, and other institutional actors improved access to entrepreneurial financing in developing countries by building shared expectations and serving as a bridge between BAs and disconnected entrepreneurs. The chapter contributes to the entrepreneurial financing literature by explaining the effect of the cognitive social capital dimension on access to early-stage financing. The study has practical implications for organizations interested in promoting entrepreneurship in developing countries.