Effects of the quality of science and innovation on venture financing: evidence from university spinoffs in Japan

University spinoffs build on strong science, which renders them a significant source of radical innovation. Radical innovation entails uncertainty as there is no market to target, which calls for individuals and organizations that bridge the gap between embryonic inventions and opportunity yet to exist. Recognizing that the commercial success of university spinoffs hinges on the entrepreneurial ecosystems they are embedded in, this study establishes an unbalanced panel (2015–2020) to analyse interrelationships among the key factors in the university spinoff ecosystem: science, innovation, and venture financing. Estimation results reveal that, first, the quality of science increases the probability of university spinoffs acquiring risk money from venture capitalists and business angels. Second, the quality of innovation has a positive effect on venture capital funding. Third, venture capital funding positively affects sales growth of university spinoffs, which corroborates the coach function of entrepreneurial intermediaries that offer startups hands-on support.