In this article we examine how startup businesses finance their operations over time. We
employ the Latent growth modeling technique to test the financial growth cycle theory
developed by Berger and Udell (1998). The data used in this study is the Kauffman Firm
Survey, the largest longitudinal data set comprised of a random sample of US startups
launched in 2004 and surveyed annually through 2011. Consistent with the predictions of
financial growth cycle theory, in the startup stage, entrepreneurs rely on initial insider capital …