Understanding the Success of Sharing Economy Startups: A Necessary Condition Analysis Quang “Neo” Bui Rochester Institute of Technology qnbbbu@rit.edu Son Ngoc Bui Texas A&M University-Commerce Son.Bui@tamuc.edu Abstract Sharing economy businesses such as Uber and AirBnB have disrupted the traditional business models and drawn considerable attention from researchers. While many sharing economy startups are found, a majority of them go unnoticed and fail to reach a critical mass for survival. Prior studies have mostly focused on consumer engagement as success factors for sharing economy businesses. Yet, there is a scarcity of research on success factors at the entry level of sharing economy businesses, namely, the fundraising rounds. This study uses a Necessary Condition Analysis (NCA) on 99 sharing economy startups to explore how human capital, innovativeness, and entrepreneurial footprint impact their fundraising success. Our findings show a large necessary effect for human capital and entrepreneurial footprint, and a medium effect for innovativeness on fundraising success. Additionally, firms only need a range of 30% to 40% level of three factors to achieve at least 40% level of fundraising success. 1. Introduction In recent years, the success of companies such as Uber and AirBnB has drawn considerable attention to the phenomenon of the sharing economy. This disruptive business model is broadly defined as “a socioeconomic system that allows peers to grant temporary access to their underutilized physical and human assets through online platforms” [1](p. 71). Unlike other types of startups, sharing economy allow individuals to engage in entrepreneurial activities (i.e., peer-to-peer transactions) without significant capital investment, using only existing and unused personal assets [2]. This unique aspect has attracted an army of “gig workers” to engage in the sharing economy; and it is estimated that between 20% to 30% of the working population in the US and Europe are active members of a sharing economy platform [3]. The frenetic excitement of the sharing economy has led to billions of investments in sharing economy startups, with prominent companies such as Uber and AirBnB receiving over $100 billion despite consistent operating losses (https://news.crunchbase.com/news/inside-the- uber-s-1-revenue-growth-and-losses/). Against this backdrop, researchers have started to examine the antecedents and effects of sharing economy successes or failures [4, 5, 1, 6]. Yet, prior studies have mostly focused on consumer engagement as a predictor for the success of sharing economy businesses [7]; but there is a real scarcity of research for success factors at the entry level for the sharing economy [1]. This research gap is critical, given a significant number of sharing economy businesses cease their operations within three years of operations [5], and the Covid-19 pandemic has overwhelmingly worsened the performance of sharing economy businesses [8]. In this study, we seek to address the research gap by exploring the success factors associated with the success of sharing economy startups. Our research question is what factors are necessary conditions for the success of sharing economy startups? Going beyond the traditional econometrics approach often used in entrepreneurial research, we employ a novel method called Necessary Condition Analysis (NCA) to understand (1) what factors are necessary (but not sufficient) conditions for the success of sharing economy startups and (2) the degree of constraint such factors have on a given success level. The analysis was conducted on a dataset of 99 sharing economy startups listed in the Crunchbase database, a leading platform for venture capital crowdsourcing. Our study contributes to the limited research on success factors for sharing economy startups by identifying human capital and entrepreneurial footprint as having a large necessary effect on fundraising success, and innovativeness only having a medium necessary effect. In terms of practicality, our findings further suggest that a range of 30% to 40% level of the three factors is necessary to achieve at least a 40% performance level in fundraising success, suggesting that these factors have a threshold value to success. We encourage future studies to look at other complementary factors that can increase the performance level of these three factors. Proceedings of the 55th Hawaii International Conference on System Sciences | 2022 Page 4452 URI: https://hdl.handle.net/10125/79879 978-0-9981331-5-7 (CC BY-NC-ND 4.0)