Does B Corp certification help startups acquire external finance? Research and practice implicitly assume an affirmative answer, but B Corp certification’s influence on early-stage funding is ambiguous. We argue that certification lowers the likelihood of funding from traditional investors by revealing dispersed managerial attention, but appeals to impact investors as a natural preference fit. Conditional on receiving financing, we expect certification to facilitate option monitoring, lowering uncertainty and attracting additional funds. We find partial support for our hypotheses in a matched sample of 720 startups. Certification decreases the chances of raising traditional finance, but has no effect on impact funding. Conversely, impact, but not traditional, investors supply more capital to certified ventures conditional on investing. Interviews with early-stage investors show that, contrary to our expectations, impact investors also recognize certification’s negative attention allocation effects in early-stage firms, while relying on alternative impact assessment tools to select investments. Certification enhances transparency for ventures receiving funding, allowing impact investors to better track investment options, signaling lower risk and higher quality. Our study advances research on B Corps, venture certification, investor sensemaking, and impact investing by offering a nuanced view of the benefits and costs of certification for young firms.
