Ventures face dual pressures toward typicality and atypicality. Drawing upon organizational research on conformity and distinctiveness, we show that prior literature has conflated two dimensions of atypicality: the extent to which a venture differs from the industry prototype’s representative features — misalignment — and the extent to which a venture embraces a multiplicity of features representative of the entire semantic space beyond a specific industry category — plurality. Using unique data on US early-stage venture capital deals from 2000 to 2017 and novel topic modeling approaches on the ventures’ business descriptions (i.e., biterm topic model), we theorize and demonstrate that while investees’ misalignment is associated with a lower investors’ valuation, plurality is associated with a higher valuation. In additional empirical analyses, we found that misalignment reduces the positive effect of plurality on valuation. These findings offer important conceptual and empirical contributions to the research on optimal distinctiveness, strategic categorization and entrepreneurship.
