Mapping the signaling environment between sustainability-focused entrepreneurship and investment inputs: A topic modeling approach

The need for climate action has increased attention to sustainability-focused entrepreneurship. In this context, entrepreneurial firms play a fundamental role in developing high-technology solutions for decarbonization but face funding gaps due to the liabilities of newness and smallness. Despite the importance of signaling in entrepreneurship, little is known about what and how to effectively signal to attract investor interest in small ventures that develop sustainable technologies. To address this gap, the present study is anchored in signaling theory and suggests a topic modeling solution to identify signals presented in company self-descriptions and areas of activity, alongside their investment inputs. Using data extracted from Crunchbase, a corpus of 5099 self-descriptions of small sustainable technology ventures over a period of 10 years, this study provides novel insights into the signaling environment of sustainability-focused entrepreneurship. The study's findings have implications for the sustainability ecosystem, namely, start-ups, small- and medium-sized enterprises, investors, and policymakers.