A variety of resources are required from others for entrepreneurs to develop and expand their businesses. Funding from investors, a founding team with the right talent and commitment, regulatory approvals, supplier collaboration, and customer attention and demand are necessary.

To gain access to those resources, entrepreneurs first need to prove their legitimacy to each of those resource holders. As well as showing that they are reliable, they need to demonstrate that their product is good and that they can take it to market. Each of these audiences has its own set of criteria for what constitutes a legitimate venture, which makes this particularly difficult. We will impart to you some shed into strategies to convince people that your startup is legit. Let’s dive in.

Leveraging Existing Sources of Legitimacy

For business founders, the first stage would be to use their wealth to source legitimacy for recruiting essential resources, such as a core founding team and startup capital. For example, William Li, the founder of NIO, created auto news, listing, transaction portal, and social communities for car buyers and drivers using the networks he had formed while building BitAuto. Likewise, Li Auto’s founder, Xiang Li, drew on connections he made while starting AutoHome, a service similar to Li Auto.

Xiang Li also brought the old AutoHome management team to the new company to boost investor confidence. NIO and Li Auto founders provided money and people to establish legitimacy, while the other businesses provided the experience to attract angel investors. This approach is how you can attract angel investors by leveraging your existing resources. In addition, angel investors’ leadership expertise, business relationships, and resources can help your company establish resources and access.

Aligning with Requirements, Norms, and Expectations

In some cases, entrepreneurs need to align their behavior with the “guidelines of the system,” such as official regulations and informal but strong conventions, to get legitimacy and access to critical resources. Investors, for instance, want the leadership team to have significant “skin in the game,” regardless of how great their credentials are.

The founders of these three companies invested more than $100 million to align themselves with this objective. Each automobile manufacturer needed a license to produce vehicles. To meet the requirements and get into the market faster, XPeng and NIO outsourced production to existing automakers, while Li Auto acquired a license-holding company.

Redefining Perceptions and Assumptions

In the end, these entrepreneurs have developed a unique perspective on what an electric vehicle could be, which makes them stand out from Tesla’s competitors. For example, instead of Tesla’s concept of a “smart” vehicle that operates on an operating system, offers over-the-air software upgrades, and has driver assistance features, they have also developed a platform that enables two-way communication between customers and service providers.

Unlike Tesla’s smartphone app, NIO, XPeng, and Li Auto allow users to build friendships and share photos, reviews, experiences, and event information. As well as these online relationships, each agency has a community of offline direct-sales and expertise shops utterly different from standard 4S dealerships.

Founders of new businesses often overlook the importance of managing perceptions of legitimacy. In the absence of legitimacy with crucial audiences, entrepreneurs could continue bootstrapping for years with little success.


In addition to demonstrating the importance of legitimacy for venture development, these EV makers also demonstrate the effectiveness of all three tactics in gaining legitimacy. Establishing legitimacy is a critical aspect of gaining access to funds and accelerating growth in the venture-building process.