Path dependence occurs when a company excessively rely on its historical strategies, inhibiting its ability to adapt to new circumstances. Kodak's failure to embrace digital photography is a notable example of this phenomenon. The company's entrenched success in film-based photography led to a reliance on outdated strategies, ultimately contributing to its bankruptcy when digital technology disrupted the analogue photography industry. Similarly, startups that heavily rely on equity crowdfunding as their primary source of financing may encounter challenges due to path dependence. While equity crowdfunding has the advantage of attracting capital from a wide range of investors, overreliance on this method can lead startups to overlook alternative funding sources that may better suit their financing needs, such as venture capital firms. Venture capital firms support startups beyond capital funds. They also provide strategic support, expertise, and valuable networks necessary for a startup's long-term growth. Thus, highly dependent on a single funding source, such as equity crowdfunding, may result in suboptimal outcomes and increase the risk of organizational failure.

This study aims to explore whether startups' initial external financing from equity crowdfunding leads to path dependence in their subsequent financing. The main research question of this study is, "Does startups' initial external financing from equity crowdfunding lead to path dependence in their subsequent financing?". This study is particularly relevant to entrepreneurs and investors, providing valuable insight into the potential path dependence in equity-crowdfunded startup financing.

To achieve the research objective, this study employs an exploratory research approach to investigate path dependence in equity-crowdfunded startup financing within the institutional context of British startups. The research utilizes secondary data from Crowdcube, Crunchbase, and the UK Company House, encompassing equity crowdfunding campaign characteristics, startup financing features, and startup profile data. The choice of the British institutional context is justified by the prevalence of equity crowdfunding among British startups, supported by favorable regulatory and tax environments. This study focuses on 74 British startups that received initial external financing from equity crowdfunding via the Crowdcube platform between 2013 and 2018. By examining the financing paths of these startups across three funding rounds, the research aims to identify patterns of path dependence characterized by a consistent reliance on external funding from equity crowdfunding.

Through the exploratory analysis, this study reveals that the 74 startups that initially received external financing from equity crowdfunding followed 20 different combinations of financing paths across three funding rounds. A total of 27 startups (36.49\%) persisted in obtaining external funding from equity crowdfunding across three funding rounds, and this was the most dominant funding path among these startups. Meanwhile, the other 47 startups followed 19 other funding paths with a wide distribution. These findings suggest that startups that initially received external financing from equity crowdfunding tend to seek external funding from equity crowdfunding in their subsequent financing rounds, implying a potential path dependence on equity-crowdfunded startup financing.

This study contributes to the limited literature on path dependence in startup financing, particularly in the context of equity crowdfunding. It builds on previous research that examined path dependence in Swedish startup financing, where equity financing had a strong path effect but did not focus on equity crowdfunding. By focusing on British startups, where equity crowdfunding is prevalent, this study provides initial insights into potential path dependence in this context, laying the groundwork for future research. Future studies should conduct empirical investigations into path dependence in equity-crowdfunded startup financing and examine the impact of high reliance on equity crowdfunding on startup performance to provide deeper insights into this topic.

This study offers valuable recommendations for entrepreneurs and investors. Entrepreneurs are advised to carefully evaluate the choice of initial external financing source for their startup, as it has long-term implications on their startup's financing path. Entrepreneurs should remain open to diverse external funding sources and not overly rely on one funding source, such as equity crowdfunding. They should comprehensively understand their startup funding needs to sustainably grow the business and make informed decisions regarding external funding sources that best align with their startup's funding needs. Thus, their startup financing activity could lead to optimal outcomes for the startup.

Furthermore, investors should take into account the phenomenon of path dependence in startup financing when making investment decisions in addition to evaluating the business and human capital aspects of startups. This process involves examining the historical financing activities of the startups and determining whether there is a recognizable pattern of path dependence in their funding. Although, to the best of our knowledge, there has been no research on the impact of path dependence in startup financing on startup performance, considering this phenomenon is crucial. According to organizational path dependence theory, path dependence could lead to inefficiencies and an increased risk of organizational failure. Therefore, it is paramount for investors to consider this factor in order to make well-informed investment decisions.

In conclusion, this exploratory study provides valuable initial findings on the potential path dependence in equity-crowdfunded startup financing. It emphasizes the need for entrepreneurs and investors to carefully consider initial financing decisions and calls for further research to better understand path dependence in equity-crowdfunded startup financing.