Leveraging political skill in the entrepreneurial fundraising process

Political skill reflects an individual’s ability to understand social settings and use such information to further personal or organizational goals. This skill set allows entrepreneurs to exert power and influence over their counterparts in negotiations. While the role of political skill has been widely addressed in organizational behavior literature, little is known about its role in entrepreneurial fundraising processes, a context that includes negotiations with external stakeholders such as investors. Particularly in the early stages of the venture lifecycle, entrepreneurs face resource scarcity and rely on social capital to obtain much-needed financial resources. Drawing on socioanalytic theory, we theorize and empirically test political skill’s role in entrepreneurial fundraising endeavors with a sample of 201 venture founders from Austria, Germany, and Switzerland. Our findings suggest that while entrepreneurs’ political skill is related to securing more follow-on funding and perceived favorable deal terms, it is also associated with unintentional consequences in the form of increased investor monitoring. This study advances research at the intersection of political skill and entrepreneurial finance literature by introducing political skill to the set of individual differences that are linked to fundraising success. We discuss both practical and political implications.