Abstract
The "pecking order theory" of financing says that firms and individuals will use personal funds before acquiring external debt and equity. The theory has been applied to the study of established firms, but it is not clear whether entrepreneurs follow a "pecking order" when financing their start-ups. This study investigates the types of financial resources acquired over time, by individuals in the process of creating a new venture. It uses data from the Panel Study of Entrepreneurial Dynamics to investigate relationships between sources of funding and characteristics of the firm and entrepreneur. Results indicate that entrepreneurs do follow a pecking order when financing. However, contrary to most studies on entrepreneurial financing, results indicate that individual characteristics--e.g., race and prior start-up experience--may have an effect on the source of funding acquired.