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Angel investment criteria
Abstract
Start-up businesses often need external financing to grow. These new ventures frequently turn to business angel investors for capital. Angels, who are often wealthy individuals, provide early stage financing, called seed capital, for these start-up ventures. This study examines what a group of angel investors in Southern California consider when reviewing an investment opportunity, and how they prioritize their investment criteria. The study utilizes a two-phase approach consisting of a qualitative first phase and a quantitative second phase. The results of this study show that trustworthiness of the entrepreneur, quality of the management team, enthusiasm of the lead entrepreneur, and exit opportunities for the angel are the angels' top criteria.
... At the ventures' earliest stage, investors primarily assess these promises by scrutinizing entrepreneurs' behavior (Cardon et al., 2009;Huang & Knight, 2017;Huang & Pearce, 2015;Lee & Huang, 2018), searching and evaluating for signals indicating credibility (Alsos & Ljunggren, 2017;Courtney et al., 2017;Eddleston et al., 2016;Prasad et al., 2000). Among these signals are entrepreneurs' skills, experience, and reputation (Huang & Pearce, 2015;Mason et al., 2017;Zott & Huy, 2007); passion (Cardon et al., 2009;Chen et al., 2009;Mitteness et al., 2012;Sudek, 2006); commitment to the venture (Busenitz et al., 2005;Huang & Pearce, 2015;Mason & Stark, 2004); gender (Alsos & Ljunggren, 2017;Eddleston et al., 2016;Marlow & Patton, 2005); and storytelling skills (Cornelissen & Clark, 2010;Martens et al., 2007;Navis & Glynn, 2011). ...
... Their primary focus is on aspects of entrepreneurs' behavior that potentially reflect their aptitude for achieving economic goals (e.g., Cardon et al., 2009;Huang & Knight, 2017;Huang & Pearce, 2015;Lee & Huang, 2018). Among these are entrepreneurs' skills, experience, and reputation (e.g., Huang & Pearce, 2015;Mason et al., 2017;Zott & Huy, 2007); passion (e.g., Cardon et al., 2009;Chen et al., 2009;Mitteness et al., 2012;Sudek, 2006); commitment to the venture (e.g., Busenitz et al., 2005;Huang & Pearce, 2015;Mason & Stark, 2004;Prasad et al., 2000); gender (e.g., Alsos & Ljunggren, 2017;Eddleston et al., 2016;Marlow & Patton, 2005); and storytelling skills (e.g., Martens et al., 2007;Navis & Glynn, 2011). Table 1 presents an overview of these criteria along with the socially related criteria identified by prior studies. ...
... In this endeavor, entrepreneurs are assumed to be fueled by prosocial intentions, namely the desire to positively impact society and the environment through commercial means (Austin et al., 2006;Dees, 2012;Hockerts, 2017;Zahra et al., 2009). Indeed, scholars have long described prosocial intention as a prerequisite for social enterprise creation (Hockerts, 2017;Kruse et al., 2021;Mair & Noboa, 2006;Tucker et al., Gender (Alsos & Ljunggren, 2017;Eddleston et al., 2016;Marlow & Patton, 2005) Gender (Anglin et al., 2022;Lee & Huang, 2018;Yang et al., 2019) Passion (Cardon et al., 2009;Chen et al., 2009;Mitteness et al., 2012;Sudek, 2006) Passion for the social mission (Miller & Wesley, 2010) Trustworthiness (Bammens & Collewaert, 2014; Maxwell & Lévesque, 2014) Human and social capital (Huang & Pearce, 2015;Mason et al., 2017;Zott & Huy, 2007) Storytelling skills (Cornelissen & Clark, 2010;Martens et al., 2007;Navis & Glynn, 2011) Commitment (Busenitz et al., 2005Cardon et al., 2017;Huang & Pearce, 2015;Mason & Stark, 2004;Prasad et al., 2000) Use of impact standards (Grimes, 2010;Hehenberger et al., 2019;Miller & Wesley, 2010; Molecke & Pinkse, 2020) Moral principles (Hellman, 2020) Social storytelling skills (Allison et al., 2015;Kreutzer, 2022;Molecke & Pinkse, 2020;Parhankangas & Renko, 2017) 2019). Accordingly, entrepreneurs are expected to exhibit compassionate and caring behaviors (Andre´& Pache, 2016;Meyskens et al., 2010;Miller et al., 2012). ...
This article investigates ethnographically how early-stage impact investors evaluate the credibility of the impact promises made by social entrepreneurs. Uncovering how investors carry out this task beyond observable characteristics and self-reported prosocial intentions, I propose that their evaluation of impact promises centers on four interrelated aspects of the entrepreneurs’ behavior: impact metrics, impact track record, impact management, and impact prospects. I articulate these aspects into a framework explaining how credible beliefs about entrepreneurs’ impact promises emerge among investors and embolden their investment decisions.
... That involves attending a pitching event with a negative mindset and then searching for flaws to justify their decision to reject, so that they might quickly reduce the number of opportunities to a more manageable size (Maxwell et al., 2011). A typical list of criteria includes: the idea (Mason & Stark, 2004), the entrepreneur/team (Huang, 2018;Sudek, 2006), the market (Mason & Rogers, 1997), and the traction (Snellman & Cacciotti, 2019; for a more comprehensive list of criteria, see Huang, 2018;Huang & Pearce, 2015;Maxwell et al., 2011;Zacharakis & Meyer, 1998). The problem with the rational approach is that it overlooks the critical role of emotional experiences and their situational causes on explaining why certain proposals make it, while others do not, thus failing to fully illustrate the way angel investment screening unfolds in real life. ...
... For example, angel investors' distrust and feelings of doubt can relate to perceived unethical behavior (Collewaert & Fassin, 2013) and entrepreneurs' character or lack of competence. Distrust can cancel out the business idea's merits (Sudek, 2006). When fear highlights the current moment, the typical behavioral consequence of fear is a defensive action and a stirring of the flight response (Lebel, 2017). ...
... Therefore, the impact of affective experiences during the later stages of screening is beyond the scope of the current analysis. Notable research on the thorough assessment in the postselection stage includes Van Osnabrugge (2000) and Sudek (2006), and research on the role of gut feeling in the postselection stage has been conducted by Huang and Pearce (2015). Moreover, those situations where the pitch triggers only neutral affective experiences in the angel investor are beyond the scope of the current analysis because lack of arousal will most likely be linked with a tendency to not devote time for further consideration. ...
... Kuzey Amerika ve Avrupa ülkelerinde ise benzer odağa sahip akademik araştırmaların yapılmış olduğu tespit edilmiştir. 1988-2018 arasındaki 30 yıllık dönemde yapılmış olan 6 farklı araştırma (Becker-Blease, Sohl, 2015;Carson, 2018;Croce, Tenca, Ughetto, 2017;Haar, Starr, MacMillan, 1988;Landström, 1998;Sudek, 2006) incelenerek melek yatırımcıların yatırım fırsatlarını değerlendirirken hangi kriterleri önemsedikleri araştırılmıştır. Bazı araştırmacıların (örn. ...
... Girişimcilik literatüründe ürün/servis, iş modeli, gelir modeli, iş stratejileri gibi faktörler ile ilişkilendirilen icra riski, bu faktörlerin inşasında ve uygulanmasında karşılaşılan güçlükleri kapsamaktadır (Feeney, Haines & Riding, 1999;Mamonov & Malaga, 2019;Sudek, 2006). Teknoloji girişimcileri erken aşamalarda icra riskini etkili bir şekilde yönetebilmek için çevik konsept ve yöntemlerden yararlanmaktadır. ...
... Geçmiş araştırmalarda (Becker-Blease & Sohl, 2015;Carson, 2018;Croce, Tenca & Ughetto, 2017;Haar, Starr & MacMillan, 1988;Landström, 1998;Sudek, 2006) ön plana çıkarılan bazı değerlendirme kriterleri doğrudan veya dolaylı olarak bu değerlendirmelerin yapılmasına yardımcı olan kriterlerdir. Bu kriterler icra riski ile ilgili olarak 1) ürün geliştirme riski, 2) iş modeli, 3) gelir yaratma potansiyeli, 4) çıkış potansiyeli; piyasa riski ile ilgili olarak 5) pazardaki giriş bariyerleri, 6) pazarın büyüme hızı; vekâlet riski ile ilgili olarak 7) güvenilirlik, 8) akıl verilebilirlik; girişimcinin icra riskini ve piyasa riskini yönetme kabiliyeti ile ilgili olarak ise 9) başarı geçmişi, 10) alan hâkimiyeti, 11) güçlü bir ekip, 12) güçlü mentörler ve danışmanlardır. ...
Melek yatırımcıların yatırım kararları çok sayıda değişkene sahip karmaşık denklemlere benzemektedir. Melek yatırımcılığın fazlasıyla ‘kişiselleşmiş’ bir aktivite olması nedeniyle her melek yatırımcının kendi heves ve hedefleri doğrultusunda özel karar parametrelerine sahip olması doğaldır. Buna karşın, melek yatırımcıların erken aşamadaki girişimlere yatırım yaparak maruz kaldıkları ortak riskler (vekâlet riski, icra riski, piyasa riski) ve
bu risklerin melek yatırımcılar açısından önemi bağlamında ele alındığında, bazı değerlendirme kriterlerinin melek yatırım kararlarının yönünü tayin etmekte yeterli gelebileceği düşünülmektedir. Bu araştırma kapsamında 1) melek yatırım kararlarının yönünü tayin eden az sayıda ama kritik önemdeki girişimci ekip ve girişim fırsatı odaklı değerlendirme kriterlerinin hangileri olduğunun keşfedilmesi, 2) geçmiş araştırmalarda savunulan “melek yatırımcıların vekâlet riskini icra riski ve piyasa riskinden daha fazla önemsediği” tezinde hareketle, girişimci ekibin yeterliliğinin yatırım kararı üzerinde hâkim olup olmadığının
test edilmesi amaçlanmaktadır. Araştırmanın ulaştığı bulgular melek yatırımcılığa yeni başlayacak olan kişilere yatırım fırsatlarının değerlendirilmesi sürecinde yararlanabilecekleri bir ‘kontrol listesi’ sunması ve girişimciler tarafından melek yatırımcıların karar sistematiğinin daha iyi anlaşılmasına katkı sağlayacak olması bakımından önemlidir. Araştırma geçmişte Kuzey Amerika ve Avrupa ülkelerinde yapılmış olan melek yatırımcılık odaklı araştırmaların bulgularını Türkiye’den ampirik kanıtlarla destekleyecek olmasına ek olarak, çok sayıda Türk melek yatırımcıyı kapsayan geniş bir örnekleme sahip olması (n=122) ve Türk melek yatırımcıların yatırım kararlarını odağına alan ilk akademik araştırmalar arasında yer alması ile literatüre katkıda bulunmaktadır.
... Founders of Startups: There are some studies pointing out that the lead entrepreneur or the startup founder is the most important factor for BAs when evaluating a startup [1,[18][19][20][21][22][23]. The qualities and profile of founders, including enthusiasm or passion, trustworthiness, commitment, capacity, knowledge, skills, and experience, are the main criteria attractive to BAs in determining funding decisions. ...
... With passion, the founder can have a clearer and more robust vision and therefore find it easier to be successful. Trustworthiness and commitment are two qualities of the founder substantially affecting BAs' investment decision-making [1,2,[21][22][23]. Besides qualities and characteristics, the knowledge, skills, capacity, and experience of the founder are also important. ...
... A management team that has prior experience and is able to cope with unexpected changes in the market and competitive environment is also more attractive to investors [24]. Sudek [21], Dat [22], and Czuchry et al. [23] pointed out that the angel investors, in making an investment decision, look for the management team's appropriateness to the startup project, their passion, commitment, unity, and understanding of their individual roles. ...
The paper aims at investigating and comparing the factors determining investment decisions by business angels (BAs) from the viewpoints of BAs and startups in Vietnam based on a framework synthesized from a literature review and primary data from in-depth interviews conducted with 8 startups and 15 angel investors. The results show that the startups’ founder, working team, financial issues, product and market, and strategy related to exit and the roles of BAs are startup-related factors determining BAs’ investment in Vietnam. For BA-related factors, the BAs’ experience, investment objectives and preferences, and culture are key determinants. The novelty of the paper is to find out the gaps between the perspectives of BAs and startups, and the difference between Vietnamese and foreign BAs’ viewpoints. The finding is that BAs, more strictly than startups, assess their business plan, financial state, product, market, and targeted consumers. Startups neglect the exit strategy and role of BAs in invested startups. In addition, foreign and domestic BAs have different opinions on startups’ market scale, and expectation of profits and BAs’ roles in startups. The paper ends by providing some implications for Vietnamese startups to attract more angel investment, focusing on improving the quality of human resources, developing a profitable, honest, and realistic business plan, and setting up a long-run vision towards the global market.
Doi: 10.28991/ESJ-2023-07-02-07
Full Text: PDF
... BAs are in general wealthy individuals, industry experienced, often self-made entrepreneurs, which provide equity capital for new ventures (Mitteness et al., 2012;Morrissett, 2007;Sudek, 2007). A consistent profile of angels has emerged after two decades of research indicating that: (a) the large majority are successful "cashed-out entrepreneurs who have harvested their own entrepreneurial ventures"; (b) they have access to their investment; and (c) they enjoy the process of supporting new venture development (Morrissett, 2007;Shane, 2012;Wong et al., 2009). ...
... Following the seminal work of Tyebjee and Bruno (1984), several other studies (e.g., Fried and Hisrich, 1994;Macmillan et al., 1985;Mason and Stark, 2004;Mishra, 2004;Sudek, 2007;Zacharakis and Meyer, 1998;Zinecker and Bolf, 2015), have further identified similar categories of investment evaluation criteria. Table 1 provides an overview of selected studies comparing investment evaluation criteria made by VCs and BAs. ...
... While BAs may co-invest VCs, this is often less than a quarter of all investments. VCs usually complement BAs investments in later stages (Sudek, 2007) with BAs filling the gap where small firms cannot fulfil VCs criteria in terms of size and growth (van Osnabrugge, 2000). Funding rounds exclusively funded by BAs tend to attract other BAs for follow-on investments, contrary to investments that receive VCs capital in later rounds (Wong et al., 2009). ...
... These investors are concerned about not only potential agency problems (moral hazard and adverse selection), but also the extent to which an entrepreneur is willing to take advantage of the non-financial resources offered (Huang & Knight, 2017). Factors such as the investor liking the entrepreneur (Huang, 2018;Mason et al., 2017;Sudek, 2006), the perceived similarity between investor and entrepreneur (Franke et al., 2006;Murnieks et al., 2011), the entrepreneur's openness to feedback (Ciuchta et al., 2018), and the entrepreneur's expressed fondness for an investor (Nagy et al., 2012;Westphal & Stern, 2007) have been shown to increase the likelihood of investment. These characteristics and behaviors influence the investor's confidence that the entrepreneur will likely advance the venture by taking into account the investor's interests and capitalizing on the non-financial resources provided (Huang & Knight, 2017). ...
... Therefore, entrepreneurial competence is a key consideration for early-stage equity investors (Brush et al., 2012;Landström, 1998). The majority of entrepreneur-level investment criteria identified (Ferrati & Muffatto, 2019;MacMillan et al., 1985;Sudek, 2006) fall under the broad dimension of competence (e.g., education, experience, expertise, track record, market knowledge, preparedness) and competence-enhancing personality traits (e.g., persistence, commitment, resilience), while the minority fall under the broad dimension of potential for cooperation (e.g., coachability, likability, trustworthiness). This suggests that investors are more sensitive to information about the entrepreneur's competence than to information about the entrepreneur's cooperativeness. ...
... This display of openness to feedback, in turn, strengthens the relationship, increasing investors' willingness to provide financial and nonfinancial resources (Ciuchta et al., 2018;Huang & Knight, 2017). An entrepreneur's eagerness to take into consideration advice is also demonstrated through involvement with formal or informal advisors (Sudek, 2006). Such advisors can significantly contribute to the new venture's readiness for funding and improve the experience of the negotiation phase (Lahti, 2014;Lehtonen & Lahti, 2009). ...
Building on social-psychological insights into social perception and judgment and empirical findings from the entrepreneurship literature, we propose that early-stage equity investors look at two main dimensions to assess entrepreneurs seeking early-stage financing: competence and cooperativeness. In all, 84 angel investors and venture capitalists active in Europe participated in a conjoint experiment. The results show that investors prioritize entrepreneurs’ competence over their cooperativeness. Entrepreneurs’ competence is even more appealing to investors when combined with coachability. We find that entrepreneurs can compensate for a lack of experience by demonstrating solid market knowledge and appearing to be coachable. Furthermore, the results suggest that investors differ in their consideration of entrepreneurs’ cooperativeness, but not competence, when making investment decisions—a finding that is conditional on investors’ usual level of involvement in their portfolio ventures. We discuss these findings from a theoretical and practical perspective.
... In doing so, entrepreneurs attempt to shape resource providers' risk perceptions associated with their new venture (as an investment opportunity) and elevate resource providers' willingness to confer resources in support of the new venture. For example, research reveals that entrepreneurs must signal their product or service market potential (Cardon et al., 2017;Carpentier and Suret, 2015;Chen et al., 2009) and show their founding team's possession of the necessary human capital (e.g., Bronzini et al., 2020;MacMillan et al., 1987;Sudek, 2006) to secure funding from resource providers. Done well, informational signaling increases resource providers' likelihood of providing resources to support the venture. ...
... It reflects their interpretation of each entrepreneur's informational signal that may lead to a subsequent exchange relationship (Huang and Knight, 2017). Our measure reflected the investment-risk perceptions of founders and investors concerning the prospect of the new venture's financial success (Hsu et al., 2014;Zacharakis A and Meyer, 2000), the capability of the founder, and the top management team (TMT; Allison et al., 2017;Hsu et al., 2014;Mac-Millan et al., 1985;Sudek, 2006). In sum, our measure assessed the resource providers' evaluation of three salient predictors of the future success of new ventures: (a) venture potential, (b) an assessment of the entrepreneur, and (c) an assessment of the TMT. ...
... Respondents also evaluated whether they displayed (c) "passion," (d) "salesmanship," and (e) were enthusiastic during the presentation. An assessment of founding teams is a critical step in the evaluative process for resource providers (Bronzini et al., 2020;MacMillan et al., 1987;Sudek, 2006). Respondents evaluated the TMT of a new venture by rating them on four items (Cronbach α = 0.86): (a) "the integrity of top management," (b) "the experience of top management," (c) the well-roundedness of the TMT, and (d) "the decisionmaking capability of the management team." ...
Experienced founders and investors are arguably the venture community members most likely to possess needed financial and social resources for startups. We present a model of venture evaluation where entrepreneurs solicit these resource providers for needed financial and social resources. Our model addresses how resource providers' venture investment propensity influences their evaluation of entrepreneurs' informational signals and how their venture evaluation predicts their willingness to provide financial and social resources. We test our model using real-time decisions and find resource providers with founding experience (both non-investor founders and investors with founding experience) leverage their investment propensity more than non-founder investors when evaluating new ventures. In addition, our post-hoc analysis reveals that resource providers' founding experience is associated with their willingness to confer social resources. Overall, this paper focuses on the perspective of resource providers and addresses how their investment propensity, types of venturing experience, and venture evaluation influence their willingness to render resource support to new ventures.
Executive summary
New venture creation is often dependent upon a community of individuals who support dedicated entrepreneurs. This support includes financial (e.g., money, equipment, etc.) and social resources (advice, referrals, etc.) that entrepreneurs use to develop their products and services for the marketplace. Entrepreneurs initiate this process when they solicit venture community members for resource support.
While there is depth in the extant research concerning the importance of financial and social resources, few studies provide a more granular view illuminating why experienced venture community members are willing to confer resources at the nascent stages of venture development. Indeed, there is little consensus concerning what attributes and information lead to resource support by these resource providers, especially at the nascent stages of new venture creation. These mixed findings lead to varied guidance, at times conflicting, concerning how entrepreneurs should solicit resource providers in venture communities. We suggest that the lack of clarity occurs because the literature does not fully address resource providers' background and characteristics, including the types of venturing experiences they possess.
Our research question addresses what factors influence resource providers' willingness to engage in resource conferrals to entrepreneurs in support of their new ventures. We focus on the antecedents and consequences of resource providers' interpretation of entrepreneurs' informational signaling. Resource providers' propensity to invest in new ventures (in short, investment propensity) should be associated with their interpretation of entrepreneurs' informational signals. More specifically, we hypothesize the higher resource providers' investment propensity, the more likely they will perceive the future success of new ventures under evaluation.
Our study also focuses on the differential effects of venture founding and investing experience on the relationship between investment propensity and venture evaluation. Based on these two types of venturing experience, we classify resource providers into three types: (a) non-investor founders, (b) non-founder investors, and (c) investors with founding experience. As potential resource providers, these venture community members are most likely to have accumulated the financial and social resource stocks necessary for supporting new ventures. Therefore, we hypothesize that the difference between founding experience and investing experience modifies the relationship between resource providers' investment propensity and their venture evaluation. More specifically, we posit that compared to non-founder investors, resource providers with founding experience—both non-investor founders and investors with founding experience—leverage their investment propensity to a greater extent in their venture evaluation. Afterward, we delineate the relationship between resource providers' venture evaluation and willingness to provide financial and social resources to entrepreneurs in support of their new ventures. The focal resources considered in this study are (a) monetary investment, (b) advice, and (c) recommendations to others.
We tested our model using real-time survey data that comprised 217 individual pitch evaluations of 46 startups and 38 survey respondents over a six-year timeframe. While we found no statistical support for the relationship between resource providers' investment propensity and venture evaluation, we did find differences between resource providers with and without founding experience. Specifically, we found that among founders, including non-investor founders and investors with founding experience, their investment propensity is positively related to their venture evaluation compared to investors without founding experience. Finally, we found that resource providers' venture evaluation is positively related to their willingness to invest in, advise, and recommend new ventures. Our additional post-hoc analysis revealed that compared to investors without founding experience, founders are similarly willing to confer financial resources but are more willing to confer social resources. Based on our findings, our study provides evidence that differences in the types of resource providers' venturing experience can help explain how resource providers' domain-specific risk propensity (specifically, investment propensity) can shape their venture evaluation and willingness to confer financial and social resources.
... -Referring to the research of Hill, B., and Power, D (2002), the top three factors of startups to attract angel investors: quality of management team, potential growth of the market and competitive advantages of product. -Research by Sudek (2006) shows that angel investors focus on four main factors, including: founder's passion, founder's trustworthiness, quality of management team and exit strategy. In which, the founder's passion is the most important factor. ...
... Specifically, the 6 most important factors: 1) Enthusiasm of the founder, 2) Trustworthiness of the founder, 3) Market growth and attractiveness, 4) Growth potential, 5) Competitive advantage of products, 6) Quality of management team are all human factors and products of the startup. The 3 factors at the 1st, 2nd and 6th positions in the criteria that foreign angel investors selecting to invest in startups in Vietnam are similar to the research results of Sudek (2006) when conducting a survey on the investment process of angel investors in Southern California (USA) to select investment opportunities and to rank the criteria for evaluating such investment opportunities. The results show that angel investors focus on 4 main criteria: Enthusiasm of the founder; Trustworthiness of the founder; the quality of the management team; exit strategies and investment flexibility of angel investors. ...
... When startup founder show enthusiasm, they will attract the attention of angel investors more than they have a good business idea or competitive product. The reason may lie in the perception that a successful startup is very difficult, so startup founder who lack enthusiasm and passion will have little chance of success (Sudek, 2006). Likewise, according to Elitzur and Gavious (2003), angel investor decisions relate to the amount of money they intend to invest in the startup, the shares they expect to receive, the amount of money expect to deal in the next rounds. ...
... Typically, venture capital investments are the primary demand of tech start-ups [Baehr and Loomis (2015)]. Moreover, the advantage of fundraising from VCs is post activities that mainly support their backed¯rms, such as their experiences, networking, and managerial abilities [Sudek (2006)]. However, only 1-2 percentage of all tech start-ups managed to attract VCs to invest in their businesses [Šarić (2017); Šimić (2015); Gompers et al. (2020)]. ...
... Although entrepreneurs have innovativeness, most of them lack knowledge in marketing [Tripopsakul and Choochatpong (2014); Maair and Fangjai (2018)] which a®ects e®orts to take the¯rms' products or services to technology commercialization [Chen (2009)]. Therefore, VCs [Tyebjee and Bruno (1984);MacMillan et al. (1985); Hall and Hofer (1993); Fried and Hisrich (1994); Muzyka et al. (1996);Pandey et al. (1995); Chotigeat et al. (1997); Zutshi et al. (1999); Mason and Stark (2004); Petty and Gruber (2011);Narayanasamy et al. (2012); Rostamzadeh et al. (2014); Dhochak and Sharma (2016); Tian et al. (2018); Yang and Zhao (2018); Seong and Kim (2021)], angel investors [Sudek (2006); Šarić (2017)], and public VCs [A®ul-Dadzie et al. (2015); A®ul-Dadzie and A®ul-Dadzie (2016)] should highly emphasize market characteristics in evaluating start-up businesses because it is a crucial mechanism to drive the pro¯tability of¯rm's high technology products [Dutta et al. (1999)]. Most entrepreneurs lack knowledge in international business; however, they know the domestic market and customers in more detail. ...
... ;Chotigeat et al. (1997);Zutshi et al. (1999);Mason and Stark (2004);Sudek (2006); Petty and Gruber(2011); Narayanasamy et al. (2012); Rostamzadeh et al. (2014); Dhochak and Sharma (2016); Šarić (2017); Yang and Zhao (2018); Tian et al. (2018); Seong and Kim ...
This study aims to analyze factors that influence tech-focused government agencies’ decision-making process to evaluate tech start-ups for supporting funds. The conceptual framework was based on qualitative research principles from in-depth interviews with seven tech-focused government agencies and confirmed the factors used in their decision-making processes. It was confirmed that the main factors consist of entrepreneurship characteristics, product/service characteristics, market characteristics, financial consideration, and capability of the management team. Furthermore, our findings revealed additional factors that influence tech-focused government agencies’ decision-making process, namely technology and innovation, business potential, and personnel and team.
... The current literature on the effects of entrepreneurial passion is mixed. On one hand, because passion comes from engaging in activities that are meaningful to a person's sense of self-identity, it is deemed to be an indispensable quality for an entrepreneur (Cardon et al., 2009;Sudek, 2006). This argument posits that passion will motivate the entrepreneur to work harder, be more creative in pursuing their goals, allow them to form more robust and widespread social networks, show greater self-efficacy in the face of challenges, set higher goals for themselves and their ventures, and attract more investment (Baum and Locke, 2004;Cardon et al., 2009;Duckworth et al., 2007;Ho and Pollack, 2014;Toth et al., 2021). ...
... With regards to policy makers and investors, pitch competitions are an opportunity to evaluate multiple potential investment opportunities within a short period of time. Past research suggests that investors are likely to place considerable emphasis on their gut feeling (Chen et al., 2009), and rely heavily on their impression of the presenters' passion and commitment (Sudek, 2006), in making their decisions. Despite the investor's intent to focus on objective criteria, the findings underscore prior research findings on the subject that individual presentation style and individual impressions are likely to have a strong impact on the decision to invest. ...
Purpose
Drawing from affect as social information (AASI) theory, this study examines how the relationship between perceived passion, quality of the presenter and investment intention is influenced by emotional labor engaged in by the presenter. This study clarifies and deepens the understanding of how passion influences entrepreneurial success by studying the role of emotional labor in the relationship between passion and investment decisions.
Design/methodology/approach
This study tested the moderated mediation effects between perceived presenter passion and investor intention to invest using data from 62 presenters' and 169 judges' responses from the 31 judges during a business plan (or “pitch”) competition.
Findings
Results confirmed a positive indirect effect of perceived passion on intention to invest, as mediated by the investor's evaluation of the quality of the presenter. Emotional labor moderated the relationship such that low levels of emotional labor engaged in by the presenters strengthened the mediated relationship between perceived passion, quality of the presenter and intention to invest.
Originality/value
The findings suggest that the authenticity of passion (as measured by the degree of emotional labor engaged in by the presenter) influences this dynamic, such that displays of passion that are perceived as being authentic are more likely to lead to an investment decision. Using AASI, this study conceptualized and tested quality of the presenter as an important intervening variable that can help explain the lack of coherent findings. The results supported this conceptualization, providing empirical evidence for the oft-quoted adage “invest in people, not ideas.”
... Dựa trên kết quả nghiên cứu về quá trình chọn lọc dự án của các thiên thần đầu tư, Sudek (2006) cũng đề ra các chính sách cho cả các nhà đầu tư và các nghiệp chủ. Về phía nghiệp chủ, trước hết họ cần phải nhận ra rằng một ý tưởng xuất sắc là chưa đủ để đạt được vốn đầu tư. ...
... Kết quả này củng cố thêm các bằng chứng thực nghiệm rằng việc đầu tư theo kiểu thiên thần kinh doanh chủ yếu là dành cho phái nam, như các kết quả đạt được của các tác giả Farrell (1998),Harrison và Mason (1992),Hindle và Lee (2002). Cuối cùng, khi khai thác sự đầu tư vào các doanh nghiệp được sở hữu bởi thành viên của gia đình với các doanh nghiệp sở hữu bởi người ngoài, Maula và cộng sự phát hiện ra rằng đầu tư vào doanh nghiệp bên ngoài mối quan hệ gia đình được dẫn dắt bởi các quyết định cực kỳ chủ động, trong khi đầu tư vào doanh nghiệp của thành viên gia đình vẫn có thể mang tính chủ động nhưng có thể chỉ để hỗ trợ kinh doanh cho thành viên gia đình hoặc mang tính cha truyền con nối hơn là các động cơ lợi nhuận khác.Theo các nghiên cứu tìm kiếm và khớp nối, quy trình sàng lọc và lựa chọn đầu tư của các thiên thần kinh doanh được phân tích bởiSudek (2006) dựa trên một mẫu số liệu về một nhóm các thiên thần kinh doanh tại bang Nam California, Hoa Kỳ. Các thiên thần kinh doanh được khảo sát về quá trình lựa chọn các cơ hội đầu tư và xếp hạng các tiêu chí đánh giá các cơ hội đầu tư đó. ...
Abstract: The goal of this study is to clarify the current E-commerce logistics in
Vietnam, the case of Shopee, thereby, analyzing the the advantages, disadvantages,
opportunities and challenges for Shopee, propose some recommendations to develop ELogistics at Shopee. The author used the customer survey method to collect their opinions about E-logistics at Shopee in 4 main operations: order processing, inventory
management, transportation, and order refund. The author synthesizes customers' opinions and propose some recommendations to develop E-logistics at Shopee. The
recommendations are: improving order processing time, applying technology in inventory management, developing the network of transportation channels and improving the refund process at Shop
... Personality traits such as perseverance, commitment, entrepreneurial passion, trustworthiness, likability, and coachability appear repeatedly on the investment criteria lists of AIs and VCs (Van Osnabrugge 1998;Sudek 2006;MacMillan, Siegel, and Narasimha 1985). Personality traits can be signaled through accomplishments, verbal or non-verbal language, and affiliations. ...
... Informational signals provide information about the return investors can expect on financial resources, while interpersonal signals communicate information about the potential return on non-financial resources as well (Ciuchta et al. 2018). VCs and AIs seek to add value through their active involvement in addition to injecting financial capital (Van Osnabrugge and Robinson 2000;Sudek 2006). Baron and Markman (2000) explained that interpersonal skills are important for building social capital and therefore gaining access to needed resources. ...
Access to early-stage equity financing is vital to the growth of high-potential new ventures. To understand how entrepreneurs obtain external financing, researchers have studied the effectiveness of different signals that entrepreneurs send to investors. In this paper, we provide an overview of current research that uses signaling theory to study the likelihood and success of obtaining funding from angel investors and venture capitalists. The content analysis reveals that empirical research has well explored the signaling value of grants, prior investments, and the human and social capital of the firm to early-stage equity investors. However, we find that the literature on signaling effects on early-stage equity investors is fragmented and undertheorized. We note that while there has been an increase in the number of studies using signaling theory to explain success in obtaining early-stage equity financing, the theory remains underutilized, despite its suitability for this particular area of research. We describe the core ideas of signaling theory and how researchers have applied them in the context of venture capital and angel investing. We discuss how this stream of research can build on and extend signaling theory and highlight promising avenues for future research.
... Hybrid women entrepreneurs are part of social structures that affect growth and labor flexibility, which are the key indicators of the predominance of high-growth entrepreneurship Paul et al., 2007;Ahmad et al., 2022). A further indication of self-employment's extreme precariousness is that people with more hybrid experience prefer hybrid to full-entrepreneurial entry (Folta et al., 2010;Sudek, 2006;Riding, 2007). Lack of sufficient entrepreneurial policies and financial assistance from the government may impact the country's growth. ...
Through the lens of social cognitive theory and role enrichment theory, this research explores on-the-job issues faced by low-income female college teachers working in Pakistan's higher education institutions (HEIs). This exploration aimed to trace the stimulus factors in full-time employees responsible for engaging in hybrid entrepreneurship. A qualitative exploratory study was conducted to obtain rigorous and trustworthy results. We used snowball sampling to approach 26 women academicians in HEIs for face-to-face interviews. Thematic inductive analysis was performed using NVivo 11 Plus software. The study's findings indicate that some teachers faced financial constraints due to low salary packages, single parenting, and time flexibility that forced them to move towards being part-time entrepreneurs. In addition, the economic and political conditions of the country were identified as influential factors in their decisions on entrepreneurial intentions and starting hybrid entrepreneurship. The result indicates another outcome stream that higher work pressure, job insecurities, entrepreneurial intentions, and financial constraints urge employees to make hybrid financial investment decisions. Our findings revealed the stimulus factors that women academicians in HEIs are directly or indirectly involved in hybrid entrepreneurship and how extra working time affects their family and work-life imbalance.
... De early stage funding die angels bieden, ook wel seed capital genoemd, vormen in bedragen het grootste gedeelte van de totale investeringen voor startups. Kijkende naar de criteria waarop business angels hun investeringen selecteren is er een verschil met venture capitalists, onder meer op het gebied van motieven en due diligence (Sudek, 2006). Business angels investeren eerder op instinct en vanuit opportunisme en doen in tegenstelling tot venture capitalists beperkter aan due diligence onderzoek. ...
Van startup naar scaleup: Welke impact heeft groeikapitaal op de professionalisering van de organisatiestructuur binnen startups?
... It has been found that professional investors when dealing face-to-face with founders rely on criteria related to the top management team such as its human capital (Barbi & Mattioli, 2019), its industry experience (Carpentier & Suret, 2015), and founders' commitment and integrity (Maxwell et al., 2011). They also rely on criteria related to the business potential, such as operating revenue and growth (Sudek, 2006), and its profitability, business value, and investment exit opportunities (Harrison & Mason, 2017). Meanwhile, contrary to professional investors, amateur investors in equity crowdfunding focus on aspects most related to crowd participation such as the funding goal, the number of backers, and the campaign duration (Lukkarinen et al., 2019), crowd bias (Martinez-Gomez et al., 2020), discussion boards (Kleinert & Volkmann, 2019), and signaling (Ahlers et al., 2015). ...
Amateur and professional investors co-invest in nascent companies via the largest equity crowdfunding platform in Mexico, PlayBusiness. However, little is known about investment criteria that drive backers to invest in a venture, and whether the two groups of investors exhibit differences in decision-making. Based on past research on the investment behavior of investors, the study explores the extent to which three major factors impact their investment decisions. Data from 238 investors show that Certification plays a significant role. However, Management Team and Business Potential are not quite relevant for decision-making. Within the factor Certification, we found investors assign different importance to criteria, suggesting amateur and professional investors evaluate investment opportunities differently. Outside Certification, amateur investors praise the importance of team-related aspects, whereas professional investors assign a higher weight to financial aspects of the project, suggesting differences in information processing and decision-making between types of investors.
... Past research on business angels also suggests that non-utilitarian, emotional drivers can play an important role as they make the collaboration between entrepreneurs and angels more personal (Sudek, 2006): business angels want to "have fun while making money" and be involved with entrepreneurial ventures (Mason & Harrison, 2002). The search for "fun" affects the investment selection process: Benjamin and Margulis (2000) outline the role of the passionate commitment of entrepreneurs as a powerful tool to motivate investors (Stenholm & Renko, 2016), for example I3_SLE2 states: "I like the pose of Entrepreneur's-Name the founder -he carries a humility that I love to see in founders […] Entrepreneur's-Name is absolutely outstanding". ...
Plain English Summary
Our research presents a novel framework that delves into the intricacies of the investment experience of equity crowdfunders. We examine the underlying motives that drive their investment decisions (utilitarian, emotional and expressive), the corresponding behavioral patterns, and the challenges that they encounter along the way. Drawing on the principles of behavioral finance, we contend that the success of equity crowdfunding as an alternative funding source for entrepreneurial firms hinges on the platform's ability to meet the diverse investment motives of the crowd across different stages of the investment process. To illustrate our argument, we conducted a netnographic analysis of a UK-based online community of equity crowdfunders. Our findings expose the adverse effects of a lack of monetization and low economic returns on the utilitarian motives of investors, leading to a diminished level of satisfaction. Additionally, we reveal that the difficulties investors face in interacting with entrepreneurs and platforms, coupled with the challenges of presenting themselves as experts, supporters of valued projects, or successful crowdfunders, can hamper the expressive and emotional motives of investors, resulting in dissatisfaction. Such challenges have the potential to erode the future interest of equity crowdfunders in the platform, undermining the viability of equity crowdfunding as a funding source for entrepreneurial firms. Our framework offers valuable insights into the factors that shape the investment experience of equity crowdfunders, providing testable propositions and highlighting the importance of addressing the identified issues to ensure the long-term sustainability and success of equity crowdfunding as a funding avenue for entrepreneurial firms.
... The business model's attractiveness and advertising quality have been shown to attract investment from crowdfunding for enterprises in Germany [35]. The entrepreneur's reliability, the quality of the management team, and leadership enthusiasm are relevant factors for angel investors in the USA [36]. ...
Social impact investing and social entrepreneurship have great potential for solving global problems. However, practitioners and researchers know little about the entrepreneurial process and the investors’ criteria. Therefore, we identify the determinants of access to external finance for social enterprises in an emerging economy using a quantitative approach in a large sample (N = 601). We found that impact sector, business model, entrepreneurial support, development stage, and the adoption of technologies impact access to finance by social enterprises. We also show that green technologies have greater funding access than other enterprises and that social impact investors are more aware of environmental issues and less concerned with financial returns. To raise more funding, we suggest that social entrepreneurs include environmental issues in their business, quickly validate their idea, add an intermediary company between the enterprise and the consumer, seek the support of incubators or accelerators, and adopt emerging technologies in the product or service offered.
... On the other hand, attracting BAs is not that easy. Sudek (2006) argues that one of the most important aspect in the BAs assessment criteria is the team and its ability to survive. As mentioned in the first section of this chapter, survivability is also highly important to the business development. ...
The purpose of this research is to examine what are the changes in team processes of entrepreneurial team when a new entrepreneur joins it. The paper recognizes a gap in the literature between changes in team processes and changes in team processes in entrepreneurial context. Therefore, it uses a literature from the team processes, which later is compared to the findings which are conducted in an entrepreneurial context. The study uses a theoretical framework to distinguish the different team processes phases. In addition, a qualitative approach is used in gathering the primary data of this paper. Through ten in-depth semi-structured interviews, six people out of three companies were interviewed. The gathered information was analysed by using a narrative approach. This aimed to ease the comparison between the already existing theory on team processes and on the same topic but in entrepreneurial context. The findings of this paper recognize not only some similarities in the literature of team processes and team processes in an entrepreneurial context but also identify some differences between both. The results of this research led to both advancing the already existing literature on the topic and identifying areas in which future studies may focus on.
... d. The entity expects to receive SGD 105,000 from outside investors investing in the entity (Sudek, 2006) and the amount will be divided into two parts: the investment for the purpose of cost of production. A total of SGD 100,000 will be used for manufacturing outsourcing in selected factories, and a portion of the total SGD 5,000 will be used for the cost of building and managing customer relations. ...
This business plan showcases the health-promoting food business, the organica's lotus seed granola. Health-conscious people who lead a fast-paced life are working people aged 25 to 40 years in Bangkok. In the early stages of product development, the first batch of products will be released in four flavors: original, caramel, milk, and chocolate. The firm has set a selling price of S$3.5 per piece and projected year 1 and year 2 sales of 60,000 and 80,000 pieces respectively.
... Organization and Human Capital (Founders, Team, Entrepreneur). Organizational factors related to the entrepreneur, founders, or team have been among the top criteria cited by early-stage investors (Bernstein et al., 2017;Kaplan & Stromberg, 2004;MacMillan et al., 1985;Sudek, 2006;Wessendorf et al., 2019) in their evaluation processes as they have been considered a primary source of agency risk due to "uncertain and incomplete relations between investor and investee" (Reid & Smith, 2002:7). The team has been found to be a critical factor both for the success and the failure of early-stage investments (Gompers et al., 2020); accordingly, team related factors had been a primary concern of start-up investors (Franke et al., 2008). ...
Start-ups are considered as the way to ensure high added value and competitiveness in economies around the world. While investments in start-ups and government incentives tend to increase, evaluation of start-ups risks is an important issue not only for increasing the return on the investment but also for the efficient use of resources. This study examines the specific risks of 23 start-ups operating in various sectors in Türkiye. Employing multiple case method, the start-ups’ risk factors have been analyzed under four major dimensions (organization and human capital; technology and product; financials; marketing and implementation). Factors affecting the risk of start-ups have been assessed in depth according to their expected impact on funders’ decisions. Findings reveal that issues like key personnel dependence and process efficiency must be carefully assessed as they have a critical role in the survival of start-ups. Due to lack of financial resources and the length of time needed to reach a positive cash flow, the start-ups’ focus can be frequently shifted from their core operations to temporary income generating activities, which also increases the risk. Start-ups are set up subsequently to successfully completed R&D projects, therefore their founders mostly have an engineering background. However, although high R&D potential can be considered as having a risk decreasing effect, it is still their ability to efficiently manage financial resources and to adopt an appropriate marketing strategy to commercialize their products in order to generate cash flows and to attain a stable growth that actually determines their risk levels.
... Organization and Human Capital (Founders, Team, Entrepreneur). Organizational factors related to the entrepreneur, founders, or team have been among the top criteria cited by early-stage investors (Bernstein et al., 2017;Kaplan & Stromberg, 2004;MacMillan et al., 1985;Sudek, 2006;Wessendorf et al., 2019) in their evaluation processes as they have been considered a primary source of agency risk due to "uncertain and incomplete relations between investor and investee" (Reid & Smith, 2002:7). The team has been found to be a critical factor both for the success and the failure of early-stage investments (Gompers et al., 2020); accordingly, team related factors had been a primary concern of start-up investors (Franke et al., 2008). ...
Start-ups are considered as the way to ensure high added value and competitiveness in economies around the world. While investments in start-ups and government incentives tend to increase, evaluation of start-ups risks is an important issue not only for increasing the return on the investment but also for the efficient use of resources. This study examines the specific risks of 23 start-ups operating in various sectors in Türkiye. Employing multiple case method, the start-ups' risk factors have been analyzed under four major dimensions (organization and human capital; technology and product; financials; marketing and implementation). Factors affecting the risk of start-ups have been assessed in depth according to their expected impact on funders' decisions. Findings reveal that issues like key personnel dependence and process efficiency must be carefully assessed as they have a critical role in the survival of start-ups. Due to lack of financial resources and the length of time needed to reach a positive cash flow, the start-ups' focus can be frequently shifted from their core operations to temporary income generating activities, which also increases the risk. Start-ups are set up subsequently to successfully completed R&D projects, therefore their founders mostly have an engineering background. However, although high R&D potential can be considered as having a risk decreasing effect, it is still their ability to efficiently manage financial resources and to adopt an appropriate marketing strategy to commercialize their products in order to generate cash flows and to attain a stable growth that actually determines their risk levels.
ÖZ
Yeni kurulan girişimler, dünya ekonomilerde yüksek katma değer ve rekabet gücü sağlamanın yolu olarak görülmektedir. Yeni kurulan girişimlere yapılan yatırımlar ve devlet teşvikleri artma eğilimindeyken, yeni kurulan girişimlerin risklerinin değerlendirilmesi, sadece yatırımın geri dönüşünü artırmak için değil, kaynakların verimli kullanılması açısından da önemli bir konudur. Bu çalışmada, Türkiye'de çeşitli sektörlerde faaliyet gösteren 23 yeni kurulan girişimin spesifik riskleri incelenmektedir. Çoklu vaka analizi yöntemi kullanılarak, yeni kurulan girişimlerin risk faktörleri dört ana boyutta (organizasyon ve insan sermayesi; teknoloji ve ürün; finansal; pazarlama ve uygulama) ele alınmıştır. Yeni kurulan girişimlerin riskini etkileyen faktörler, fon sağlayıcıların kararları üzerinde beklenen etkilerine göre derinlemesine değerlendirilmiştir. Bulgular, kilit personel bağımlılığı ve süreç verimliliği gibi konuların, yeni kurulan girişimlerin hayatta kalmasında kritik bir role sahip oldukları için dikkatli bir şekilde değerlendirilmesi gerektiğini ortaya koymaktadır. Finansal kaynak yetersizliği ve pozitif bir nakit akışına ulaşmak için gereken sürenin uzunluğu nedeniyle, yeni kurulan girişimlerin sıklıkla ana faaliyetlerinden uzaklaşıp geçici gelir getirici faaliyetlere odaklanmaları sonucu risk artabilmektedir. Yeni kurulan girişimlerin başarılı bir şekilde tamamlanmış Ar-Ge projeleri sonucunda kurulmakta, bu nedenle kurucuları çoğunlukla mühendislik geçmişine sahiptir. Yüksek Ar-Ge potansiyelinin risk azaltıcı bir etkisi bulunmaktadır. Bununla birlikte, nakit akışı yaratmak ve istikrarlı bir büyüme elde etmek için finansal kaynakları etkin bir şekilde yönetme ve ürünlerini ticarileştirmek için uygun bir pazarlama stratejisi benimseme becerisi riski etkileyen en önemli faktörler olarak ortaya çıkmaktadır.
... The investment pitch is a decisive factor during the investors' initial screening stages [10]. The process of making investment decisions includes several stages: initial screening, pitch presentation, due diligence, funding, and post-involvement [13][14][15]. An entrepreneurial pitch is often conducted during the initial screening to decide on the next steps. ...
The COVID-19 pandemic led to changes in business communication. As face-to-face communication was no longer possible, many businesses shifted to Zoom because of its ease of use and user-friendly functionality. One unique context in which users were forced to transition to fully online communication was entrepreneurs' pitch presentations. This study aims to explore whether users intend to continue to use Zoom for these important investment meetings after the pandemic. The study was guided by the Unified Theory of Acceptance and Usage of Technology (UTAUT) model. We surveyed 127 business investors in Korea. The results indicated that performance expectancy and social influence were positively associated with investors' intentions to use Zoom for entrepreneurs' pitch presentations in a voluntary setting (i.e., after the pandemic restrictions are fully lifted). Effort expectancy and facilitating conditions were not significantly related to investors' intentions. The findings help us to better understand the use of video communication within business contexts after the pandemic.
... From the resource-based view, successful use of internal resources leads to successful competition (Wernerfelt, 1984). Many studies refer to team leadership skills as an important organizational resource and crucial factor for startups (Anderson and Sun, 2017;Barinova et al., 2015;Prohorovs et al., 2019;Sudek, 2006), and leadership capital is an effective factor in their success (Prommer et al., 2020). For startups' performance, leaders' behavior is as important as their activity area (Zaech and Baldegger, 2017), and an entrepreneur should be aware of the importance of a good leader (Saura et al., 2019). ...
Startups have different conditions and characteristics than other companies, so the leader, as one of the main elements of the company, can play an important role in properly training employees and discovering new opportunities and leading the company towards competitiveness. Strengthening intangible assets and increasing entrepreneurial behaviors are essential for the success of companies. A servant leadership style that strengthens employee self-efficacy and entrepreneurial orientation can play an important role in effectively leading startups towards better competitiveness. However, empirical evidence for this relationship is scarce. The present study examines the mediating role of self-efficacy and entrepreneurial orientation in the relationship between servant leadership and competitiveness. Data were collected from a sample of 230 start-up employees. Data analysis was completed through a two-stage partial least squares structural equation modeling technique. At the first stage, the measurement model was examined for construct validity and reliability, whereas at the second stage, the structural model and by implication the research hypotheses were tested. The results show that the relationship between servant leadership and competitiveness is mediated positively and significantly through self-efficacy and entrepreneurial orientation. While the direct impact of servant leadership on competitiveness is not strongly supported.
... Schumpeter describes innovative entrepreneurs as visionaries who can identify upcoming future products and markets with economic potential before others perceive these markets. Such entrepreneurs are rare, and VC firms look for such rare cases of visionary entrepreneurship (e.g., Galbraith et al., 2014;Sudek, 2006 The business models of firms are centered around these rare cases of visionary entrepreneurship in which innovative products, services, or business models disrupt and transform entire industries and markets. Such market disruptions can lead to highly profitable (temporary) monopoly situations and substantial innovation rents, which are what VC firms look for. ...
Schumpeterian entrepreneurs are considered agents of innovation and technology transfer. However, to fulfill this role, they need entrepreneurial finance. From the perspective of digital identity, we examine the relationship between a Schumpeterian digital identity and venture capital (VC) funding. Because the VC industry celebrates innovative and visionary entrepreneurship, we posit that a founder’s digital identity as a Schumpeterian-type entrepreneur influences the venture’s chances of receiving VC funding. A quantitative analysis of the language used by 3,313 founders in a large sample of Twitter messages, however, provides a mixed picture. While some dimensions of Schumpeterian entrepreneurship have a positive relationship with the acquisition of resources from VC firms (entrepreneurial vision and optimism), other dimensions seem to have no (uncertainty tolerance and rationality) or even a decreasing (achievement motivation) effect. The negative relationships observed can be explained by the particularities of the VC business model, which does not align with Schumpeterian entrepreneurship in all respects. Our study contributes to research on Schumpeterian entrepreneurship, the financing of technology transfer, and the link between entrepreneurial digital identity and entrepreneurial finance. From a practical perspective, the results of our study demonstrate the limits of VC with regard to the financing of technology transfer and highlight the need for public funding through governmental VC or agencies for (disruptive) innovation.
... Our explorative analysis identified diverse driving and inhibiting factors for financing CE business. We categorized them into the thematic areas of sources of financing, criteria for financing, and subjects of financing, which resonate with general financing-related aspects suggested by, for example, Oliner and Rudebusch [51] and Sudek [52]. The three thematic categories for multiple factors shaping CE business include the following: ...
The transition toward sustainability and the circular economy is shaping technology investment and business, leading to there being growing interest in financial aspects of circular economy businesses. As research on circular economy drivers and barriers, in addition to the literature on circular economy business and finance, has not yet provided a comprehensive view on drivers of and barriers to circular economy business financing, this study takes a theory-developing qualitative approach. It integrates extant theoretical knowledge and empirical new insights from an extensive field study in Finland, Europe, based on over 270 data sources, including interviews, workshops, reports, and media documents. From these data sources, this paper analyzes and conceptualizes the driving and inhibiting factors that have shaped the sources, criteria, and subjects of circular economy business financing. The study results that the sources of financing—being public and private sources—apply diverse criteria for financing, such as valuation and profitability of circular business models, their type, investment costs, and their business potential for financing industry itself, when they assess different subjects of financing, such as individual companies’ circular businesses, supply chains, and joint projects. Findings show that many factors that could serve as drivers have considered inhibitors. As a theoretical contribution, our study develops a conceptual model on the key factors shaping the financing of CE businesses and set of propositions on these factors inhibit and drive CE financing. Our findings provide guidance for practitioners such as managers and policy makers who aim to advance circular economy business.
... Given the frequency of video pitches in which founders, their products, and their ventures appear in crowdfunding campaigns (Mollick, 2014), scholars have started to focus on the impact of personality traits on crowdfunders' investment intentions (Ahlers et al., 2015;Allison et al., 2013;Moss et al., 2015). This research interest is triggered by studies in traditional offline investment scenarios that determine that startup founders' personality traits influence venture capitalists' and business angels' investment decisions (Cardon et al., 2009;Chen et al., 2009;Sudek, 2007). However, these studies observe the effects during direct interactions between founders and investors. ...
Reward-based crowdfunding broadens the scope of e-commerce transactions, as prototypical products are pre-sold under conditions of considerable uncertainty. To date, we know little about the mechanisms that underlie decisions to back reward-based crowdfunding campaigns. However, it is likely that startup founders’ possibility of showcasing their personalities in video pitches signals their trustworthiness, particularly, as other features, such as quality seals and customer testimonials, are often unavailable. We use signaling theory to reinforce the move from a feature-oriented perspective to a signaling perspective, as signals can transmit information about startup founders’ otherwise imperceptible qualities and abilities. Based on a survey ( N = 108), we investigate how perceived hubris – proven to be particularly salient in startup contexts – influences the funding decision of potential backers. We find that abilities and legitimacy of a startup founder are rated positively when s/he is perceived as hubristic. These results have implications for crowdfunding campaigns and highlight the relevance of personality traits in electronic markets.
... Although start-ups' success depends on understanding consumers' unsatisfied needs and offering solutions through a collection of good products, the leader's ability to promote his company also has an important role in the success of these startup companies (Mishra, 2016;Poulin et al., 2007). One of most important factors in the success in the initial stages is leadership skills (Anderson and Sun, 2017;Sudek, 2006). The leadership is the key to success in a start-up (Saura et al., 2019) and a fundamental factor for successful investment development (Cogliser and Brigham, 2004). ...
Purpose—The purpose of this study is to examine the effect of servant leadership on competitiveness of startups. Also, the role of self-efficacy as a mediator between servant leadership and competitiveness has been explored.
Design/methodology/approach—Servant leadership, competitiveness and self-efficacy were evaluated in an empirical study based on a sample of 220 employees of Iranian start-up companies.
The data analysis was performed through a two-stage partial least squares structural equation modeling technique. In the first stage, the measurement models were examined in terms of construct validity and reliability, while in the second stage, the structural model and research hypotheses were tested.
Findings—The results demonstrated that servant leadership positively affects competitiveness. Also, as expected, self-efficacy act as a mediating variable between servant leadership and competitiveness.
Practical implications—Start-ups nowadays constitute a large portion of countries’ financial turnover and economy. Considering the sharp increase in competitiveness and instability in the market, start-ups with transformational leadership are more likely to succeed. However, other styles, such as servant leadership, could play an essential role in guiding these startup companies on the way of competitiveness by strengthening employees’ empowerment and self-efficacy.
Originality/value—It is believed that the important contribution of this study is demonstrating the effects of servant leadership on competitiveness of startups. Also, the mediating role of self-efficacy in this relationship has been strongly confirmed.
... There are many qualitative rather than quantitative factors and in the finance literature no general agreement on the weight of individual criteria exists. Some authors emphasise the influence of the external environment (e.g., Civelek et al., 2021;Cumming et al., 2006;Gompers & Lerner, 1999;Gorączkowska, 2020;Kotlebova et al., 2020;Virglerova et al., 2020), others the industry and intra-firm characteristics (e.g., Belas et al., 2020;Dvorsk y et al., 2020;Ge et al., 2005;Klju cnikov et al., 2021;Kobyli nska & Lavios, 2020;Markauskas & Baliute, 2021;Miloud et al., 2012;Ondra et al., 2018;Sudek, 2004;Tyebjee & Bruno, 1984;Van Osnabrugge & Robinson, 2001). Significant uncertainty and risk are the reasons that make the candidate projects difficult to grasp from the perspective of conventional valuation methods. ...
How do business angels assess a prospective entrepreneurial firm when they make an investment decision? This article examines a central question that informal venture capitalists have been struggling with for decades: What early stage decision making criteria do investors define and apply to reduce the volume of potential deals to a more manageable size? Based on semi-structured interviews with business angels in an emerging market, we show that investors are focused on the industry structure and product features, on the other side, our results also suggest a very strong support for the personality of the entrepreneur and management team. More specifically, entrepreneur trustworthiness is an essential element affecting an investor’s decision to close a deal. Business angels set requirements in terms of the entrepreneur’s equity stake in the start-up and monitoring tools to prevent the failure of investee firms. Our findings suggest that if there are warning signs that the project is in an existential crisis, most of the investors will reject their participation. We believe that our empirical results support both researchers and practitioners to establish a better understanding between the well-developed financial theories and the underresearched informal venture capital market in a Central and Eastern European country.
... En la mayoría de los estudios sobre el tema de pymes, destacan las distintas cualidades para los grupos de emprendedores, por ejemplo, el compromiso, dinamismo, experiencia y liderazgo, reconocidos como capacidades que les proveen de la inteligencia para enfrentar adversidades del entorno, así como adquirir financiamiento, administrar la empresa y relacionarse con otras entidades. Por ejemplo, Sudek (2006) toma en cuenta las prioridades de los capitalistas durante su selección de planes empresariales, y encontró que existe una relevante atención en las peculiaridades del equipo técnico y administrativo de la firma. Otras investigaciones manifiestan que el compromiso del empresario, su experiencia y su trayectoria son otras características también relevantes para los grupos inversionistas (Dixon, 1991). ...
Las personas en el mundo enfrentan diversas dificultades, sin embargo, lo que más aqueja tanto a los individuos como a las naciones, son los problemas económicos. Por ello, hemos trabajado académicamente, para desarrollar investigación científica que promueva la Educación Financiera con la finalidad de exponer que el conocimiento teórico-práctico en esta área, trae beneficios de manera particular, local, nacional, regional e internacional. La mayoría de las personas no cuestionan, preguntan, observan o analizan sus compras, no generan otras fuentes de ingresos más allá de sus empleos, se
endeudan, comprometiendo sus ingresos futuros; y tampoco prevén un fondo para el retiro o de emergencia. Por lo que existen innumerables investigaciones, que todos estos problemas generan complicaciones de diferente índole: psicológicas, económicas, sociales, estrés, etc., por mencionar algunas...
... The above vignette depicts the phenomenon that a person becomes a business angel by funding a startup, whether by a family-related entrepreneur or a non-family-related entrepreneur (DeGennaro 2010;Landström and Mason 2016;Maxwell et al. 2011;Shane 2008;Sørheim 2003;Sørheim and Landström 2001;Sudek 2006;White and Dumay 2017). The funding may be an investment or a loan with a contractual obligation to return the investment in a timely fashion, and the business angel may have partial ownership and may participate in managing the startup, somewhat typical when financing a non-family-related entrepreneur. ...
People may finance entrepreneurs, often family members. Here, the question is: how has the COVID-19 pandemic affected people’s funding of family-related entrepreneurs and non-family-related entrepreneurs? The pandemic predictably reduced the funding of family-related entrepreneurs and especially the financing of non-family-related entrepreneurs. However, a culture supportive of family businesses may alleviate the declining funding of family-related entrepreneurs, predictably, while a secular–rational culture supportive of non-family businesses may alleviate the declining financing of non-family-related entrepreneurs. Similar to a field experiment, a globally representative survey was conducted before and after the disruption in 42 countries, interviewing 266,983 adults either before or after the disruption. The individual-level data are combined with national-level data on culture, amenable to hierarchical linear modeling. People’s financing of family-related entrepreneurs and especially of non-family-related entrepreneurs are found to have declined with the COVID-19 pandemic. However, culture provides resilience, in that the declining funding of family-related entrepreneurs was alleviated where the culture supports family businesses, and the declining funding of non-family-related entrepreneurs was alleviated in societies with a secular–rational culture. The findings contribute to contextualizing business angel financing temporally, as embedded in time before and after the COVID-19 pandemic disruption, and societally, as embedded in culture providing resilience.
... They lend support to the findings of Cumming et al. (2019b) and Rossi et al. (2019) in which platform shareholder structure matters in ECF. They are also in line with entrepreneurial studies in which founder team is possibly the most important factor when BA or VC funds choose to invest in a firm (Van Osnabrugge, 2000;Sudek, 2006;Gompers et al., 2020). ...
This paper investigates strategic entrepreneurial choice between the UK Big 3 platforms–Crowdcube, Seedrs and SyndicateRoom–that exemplify the three main equity crowdfunding (ECF) shareholder structures identified in the literature. ECF has become a strategic choice for both entrepreneurs and angel and venture capital funds as it offers mutually beneficial advantages to both, especially under the co-investment ECF model where these funds co-invest alongside the crowd. The multinomial probit results show that large founder teams are more likely to choose the co-investment model (SyndicateRoom) but are less likely to opt for the nominee ownership structure (Seedrs). Although less heterogeneous teams are more likely to choose the Seedrs and Crowdcube ownership structures, our results suggest that the probability of choosing the co-investment model (SyndicateRoom) monotonically increases as teams become more heterogeneous. The conclusion is that larger and heterogeneous teams are more likely to raise ECF funds from campaigns explicitly involving professional investors.
... It did not matter whether they liked the entrepreneur, but they had to find him trustworthy. It also observed that angels involved in formal associations or syndicates ranked return on investment higher than individual angels investors (Sudek, 2006). Taking into account the Indian context, a research conducted by Sabarinathan (2014) found that just like Chinese angel investors, Indian ones as well, preferred deals that were referred to by people they knew as opposed to professional third parties. ...
Resilience is the capacity of people to effectively cope with, adjust to, or recover from stress or adversity. It is the process and outcome of successfully adapting to difficult or challenging life experiences and the ability to rise above one's circumstances. It is a positive adaptation, and a psychological asset to encounter the problems continuously from birth to death.
... En la mayoría de los estudios sobre el tema de PYMES, destacan las distintas cualidades para los grupos de emprendedores, por ejemplo: el compromiso, dinamismo, experiencia y liderazgo, reconocidos como capacidades que les proveen de la inteligencia para enfrentar adversidades del entorno, así como adquirir financiamiento, administrar la empresa y relacionarse con otras entidades. Por ejemplo, Sudek (2006) toma en cuenta que la motivación del empresario durante la toma de decisiones reside principalmente en las peculiaridades del equipo técnico y administrativo de la firma. Así, otras investigaciones manifiestan que el compromiso del empresario, su experiencia y su trayectoria son otras características también relevantes para los grupos inversionistas (Dixon, 1991). ...
Estudios han demostrado que la Educación Financiera es necesaria para tomar decisiones adecuadas que disminuyan los costos, riesgos y problemas futuros. De esta manera, las empresas que conocen de la importancia de esta materia buscan frecuentemente alternativas que aseguren su permanencia en los mercados. Por lo que es necesario considerar que la banca digital ha revolucionado la forma de realizar operaciones financieras, tanto en los individuos como en las
compañías, facilitando el acceso al crédito. En este trabajo se exponen las Fintech como una opción de financiamiento adecuado a las nuevas demandas de las PYMES en México.
Abstract
Studies have shown that Financial Education is necessary to make appropriate decisions that reduce costs, risks and future problems. In this
way, companies that know the importance of this matter frequently seek alternatives that ensure their permanence in the markets. So it is necessary to consider that digital banking has revolutionized the way of conducting financial transactions, both in individuals and companies, facilitating access to credit. In this paper, Fintech is exposed as an adequate financing option to the new demands of SMEs in Mexico.
... In the last decade, entrepreneurship literature begins to document an overlap between entrepreneurial activities and affect (Baron, 2008;Cardon, Wincent, Singh, & Drnovsek, 2009). Affect will not only influence an entrepreneur's decision to "buy into" a business idea, but also will play a role in bringing stakeholders together to sustain the venture (Chen, Yao, & Kotha, 2009;Sudek, 2006). Casciaro & Lobo's study (2008) reveals that interpersonal feelings impact tasked-related (instrumental or functional) networks in entrepreneurial firms. ...
Nationhood is not an a priori entity, if not a symbolic and communicative device around which people imagine themselves to be. Hence the concept of identity does not refer to a universal, fixed identity, but to a contingent, historically and culturally specific social construction. Fragmented, cross-cultural, multiple identities may be generated in the relationship between cultural identities and globalisation. Globalisation has increased the range of (re)sources available for identity construction, allowing for the production of hybrid identities in the context of a global society. The widespread “cut ’ n’ mix” of cultural forms in the context of globalisation will be illustrated in the paper by the Bhutanese community. The ensuing changes will be analysed as leading not only to the fragmentation of the ‘self’ and the formation of multiple personal identities, closely followed by the fragmentation and differentiation of culture, but also to the destruction or undermining of the older bases of political and social identity. This process of fragmentation and multiplication is symptomatic of an erosion of national identity, a dissolving of it in the onslaught of globalisation.
... Thus, the angel's investment history does matter in that past decisions influence future investment decisions. Previous research found that the portfolio of past successes and failures drive investors' decisions (Sudek, 2006). This research indicates that missed opportunities is one of the defining factors for investors' decisions, and that non-investment history can dampen the likelihood of future investment. ...
As suppliers of critical risk capital, angels are routinely faced with a multitude of investment opportunities and typically invest in less than 20% of these prospects. Angels need to access these opportunities, decide which investments to pursue, and try to predict future winners and losers all within an environment typified by a high degree of information asymmetry. This research examines the real-time actions and decisions of angel investors and the effect of the investment regret or inaction on future investment decision-making. Angels who missed a past opportunity that subsequently realized a positive return are significantly less likely to invest in subsequent similar opportunities. Also, the dynamism of the market and the experience of the investor play important roles in influencing subsequent investment decisions once an investor has missed an opportunity. This research adds a level of granularity by identifying a new and potentially influential dimension—missed opportunities are an influential force in angel investment decision-making.
... Despite this, empirical evidence shows that some innovative start-ups hold a patentwhich is considered a quality signal by the market (De Rassenfosse, 2012) -and can thus achieve superior performance. In fact, new ventures resort to patents to protect their innovative efforts or create entry barriers for future market competitors (Sudek, 2006). Several studies have shown that patents are a positive signal of new firms' strength and quality (Mason and Stark, 2004;Hottenrott et al., 2016) since they offer relevant information to several stakeholders, including investors, about their innovation capabilities (Hottenrott et al., 2016). ...
Purpose
The food industry has always been supplier dominated, characterised by low research intensity, product line extensions and me-too products. However, recent changes have led new firms operating in the food industry to invest in research and development (R&D) activities in order to introduce innovations into the market and achieve superior performance. This paper aims to verify whether these changes are noteworthy by investigating whether and which innovation-related factors (investments in R&D activities, qualified scientists/engineers and holding a patent) can affect the performance of food start-ups.
Design/methodology/approach
A sample of 108 innovative start-ups operating in the food industry in Italy was selected, and a stochastic frontier analysis was carried out. This methodology was chosen because of the factorisation of the error term, which is divided into a unilateral component (revealing the inefficiency of the statistical model) and a symmetric component (revealing random gaps).
Findings
Statistical elaborations provide two interesting results. One concerns the error term (only random inefficiency affects results) and the other relates to innovation-related factors. Only investments in R&D activities positively affect the performance of innovative start-ups in the Italian food industry.
Originality/value
Results confirm the relevance of investments in R&D activities for Italian start-ups aiming to achieve superior performance in the food industry. These results confirm relevant changes are occurring in what was a supplier-dominated industry and disclose how start-ups should master the dynamics of innovation and allow for speculation on future industry trends.
Televised Business Pitches, such as Dragons' Den and Shark Tank, have gained popularity as entrepreneurs present their ideas to investors in hopes of securing funding. However, the focus of these shows is primarily on the pitching process itself. For this study, it examines the impact of these shows on its participants, specifically assessing their effectiveness in obtaining financial funding and mentoring and their influence on business growth. By analyzing the episodes and conducting semi-structured interviews with four technology startup ventures featured on the local show The Final Pitch, we collected relevant data. We utilized tables to summarize and tabulate the evidence, integrating identified themes into a cross-case report. Results reveal that The Final Pitch was effective in providing funding and mentorship opportunities for green business startups. However, the received mentoring was only a partial contributor to the businesses' longevity and growth. Meanwhile, the funding alleviated financial constraints and facilitated the realization of ideas and green business expansion. Moreover, newly emergent themes also came out such as signaling, an area that can be explored in future research. In conclusion, Televised Business Pitches offer valuable platforms to startups for acquiring financial support and mentorship.
Vietnam government considers inflation adjustment as a primary goal of policies planning and implementing to achieve economic stability and output growth. Therefore, defining the threshold in an inflation-growth relationship is an important task to propose
target inflation rate precisely. This paper investigates the threshold or U-shaped between inflation and growth in Vietnam in the period 1976-2015 using econometric techniques. Annual data of inflation and gross domestic product (GDP) is used in the model from 1976-2015. Inflation is assumed to have a nonlinear relationship with growth. Therefore, the log-transformation model testing the existence of U-shaped relationship developed by Sarel (1996) is used. The results confirm the existence of the threshold at 6 percent inflation point, and the negative impacts on the growth of hyperinflation above the threshold and too low inflation beyond the threshold. Taking into account the total impact
of inflation on growth in the whole period, the effects are negative. This finding suggests that Vietnam authorities should target lower inflation of 6 percent to improve growth performance.
SUGGESTED CITATION:
Nguyen Huu Dung, 2017. Relationship between inflation and economic growth in Vietnam, Published proceedings on the Emerging issues in economics and business in the context of international intergration. National Economics University, pp 17-30.
Gotowość inwestycyjna jest zjawiskiem wielowymiarowym, obejmującym szereg elementów powiązanych ze sobą osobą przedsiębiorcy. Stanowi istotną popytową determinantę pozyskiwania kapitału, w tym zagranicznego, przez firmy będące we wczesnych fazach rozwoju (seed i start-up), w szczególności z szeroko rozumianego rynku venture capital. Celem artykułu uczyniono wskazanie istoty i atrybutów kształtujących gotowość inwestycyjną oraz zbadanie poziomu świadomości istnienia zjawiska i jego zrozumienia wśród początkujących przedsiębiorców. Zdefiniowanie zjawiska i jego płaszczyzn oparte są na analizie światowej literatury przedmiotu i prac badawczych poświęconych omawianej tematyce. Przedstawiono również wyniki badań ankietowych przeprowadzonych wśród przedsiębiorców będących uczestnikami konkursu EkSoc StartUP! Świadomość istnienia zjawiska i umiejętność jego budowania przez firmy we wczesnych fazach rozwoju zwiększają szansę na pozyskanie kapitału na rozwój, w tym na ekspansję międzynarodową, co w dłuższym okresie napędza wzrost gospodarek światowych.
Venture capital is an important funding source for sustainable entrepreneurship and, thus, drives sustainable development. However, sustainable startups have trouble acquiring venture capital. Hence, existing literature focuses on dedicated impact investors or aims to understand why traditional venture capitalists (tVCs) avoid sustainable investment opportunities. In contrast, this study investigates investment decisions from venture capitalists without a dedicated “green” focus on sustainable startups. We investigate about 80 cases containing business plans and decision documents of sustainable and non-sustainable new ventures. Thereby, we explore whether investors react differently to sustainable business models. Using Natural Language Processing (NLP) and topic modeling, we find that tVCs do not integrate sustainability into their decision justification. However, Linguistic Inquiry and Word Count (LIWC) reveals that tVCs argue more emotionally when writing about a sustainable business case. However, this is not only the result of a stronger emotional connection to sustainability, as it might also be influenced by emotional contagion from entrepreneurs' business plans.
Cooperative behavior can facilitate successful relationships between new ventures and investors after investment but also during partner selection. This view may apply especially to accelerators, which differ from other investors by investments at the earliest venture-development stages, significant collaboration between new ventures and investors, and fast decision-making. However, prior research is insufficient to describe the role of relational governance between new ventures and accelerators. We conduct ethnographic research and twenty interviews to determine how relational governance is built into and influences how the new venture-accelerator relationship emerges. Our findings reveal that process-based trust and relational norms are developed earlier in this relationship than research from other investment contexts suggests. We derive a framework that indicates that actors include in their partner-selection processes elements that allow them to build these relational governance mechanisms, such as interacting (e.g., having a chat) and aligning future behavior, early on. We theorize that they do so because they cannot rely on ventures’ track records and seek partners with whom transactions can be defined in the short term and with whom significant collaboration is possible. Our work contributes to relational governance theory in new venture-investor relationships and recent efforts to understand accelerators.
To date, much of the research on early-stage equity investing has revolved around the question of whether early-stage equity investors place more importance on the entrepreneur (jockey) or the business opportunity (horse). Yet research has failed to agree on the relative importance of these two aspects of investment opportunity. The purpose of this study is to clarify how early-stage equity investors use available information about the entrepreneur and the business opportunity to make investment decisions. We analysed empirical data from semi-structured interviews with experienced early-stage equity investors active in Europe. In the analysis, we followed the twin slate approach, which accounts for literature review in the analytical process. Our results suggest that investors make sense of the business opportunity as a whole by integrating information about the entrepreneur and the business opportunity. We identified four aspects of early-stage investor decision-making that led us to conclude that investors’ evaluation of investment opportunities is holistic in nature. The study offers a number of practical implications for investors and entrepreneurs and enriches ongoing discussions about early-stage investors’ investment criteria.
Venture capitalists (VCs) closely evaluate the track record of entrepreneurs when screening new venture proposals for possible investment. There remains, however, ambiguity about how VCs perceive failure in the entrepreneurial journey. This study unveils how VCs evaluate past entrepreneurial failures. Through a conjoint experiment with 52 VCs, we find that past failures are viewed favorably. Entrepreneurs who failed are evaluated more positively than novices and entrepreneurs who only have a record of success. Education at a top-tier university moderates this relationship and leverages the positive perception of failure. Further, perceptions of entrepreneurs with a top-tiered education who failed are even better when VCs share a similar top-tier education.
Despite the importance of warmth and competence for social evaluation processes, we do not have a clear understanding of their relevance in entrepreneurial resource acquisition contexts. We examine the effects of cursory impressions of 350 Kickstarter crowdfunding entrepreneurs’ warmth and competence on the performance of their campaigns. Drawing from the stereotype content model and expectancy violation theory, we propose and find support for a model in which different forms of trust mediate the relationships between warmth and competence and crowdfunding performance, with the strength of these pathways differing as a function of entrepreneur gender. Specifically, we show that the crowdfunding performance of women entrepreneurs is uniquely benefited by perceptions of competence and the cognition-based trust that ensues, relative to the performance of men entrepreneurs.
Angel funding is an important source of capital for startup ventures (J. Sohl 2019), providing a similar level of capital as institutional venture capital (OECD 2011). But angel funding is challenging to study due to the informal nature of the activity. A common paradigm for new venture funding argues that new ventures initially fund their activities with angel investment and then, as they show success, make progress to commercialization and de-risk core venture propositions, ventures transition to more professional institutional (venture capital) funding. A belief in this paradigm can strongly influence early venture creation activities, and assumptions about the later availability of capital from institutional venture capital underpin many startup business plans. However, the literature exploring this phenomenon is very sparse, and the question of the relationship of angel to venture funding transition
has rarely been studied. By analyzing a large and robust dataset, this thesis advances the understanding of the actual behavior of investors and the impact this early behavior, and the funding choices involved, have on company outcomes. This thesis also explores a novel form of venture investing and places it into a broader context of new venture funding that may help explain some of the key observations discussed. These fundamentally empirical studies examine the nature/reality of important entrepreneurial phenomena of interactions between angel and venture funding in novel ways, pose questions, and identify a set results that point to a potential market failure. Attempts are made to understand these results and place them into the contexts of both research theory and a broader understanding of entrepreneurial behavior; there certainly remain a set of unanswered questions and
potential fruitful directions for future research.
DR. COLIN MASON IS READER IN ECONOMIC Geography, University of Southampton, England, and Richard Harrison is Professor of Management Development at the Ulster Business School, University of Ulster, Northern Ireland. Despite the rapid growth of studies of the informal venture capital market, knowledge of why 'business angels' reject investment opportunities remains highly generalised. In contrast with the investor focus of previous studies, this study adopts a dealspecific perspective by examining a sample of 35 investment opportunities that were considered and subsequently rejected by Metrogroup, a private investor syndicate in the United Kingdom. The paper refines and extends knowledge of 'why angels say no' in three respects. First, most investment opportunities are rejected for just one or two reasons. Second, the most common reasons for rejecting investment opportunities are associated with the entrepreneur/management team, market and marketing factors, and financial factors; a flawed or incomplete marketing strategy and flawed or incomplete financial projections are particularly significant deal killers, especially at the initial review stage. Third, with some specific exceptions, deals rejected at the initial review stage tend to be on the basis of the cumulation of a number of deficiencies rather than for a single reason.
The purpose of this work is two-fold. The first is to stimulate an interest in modeling the management of venture capital funds. The second is to provide entrepreneurs with insights which can help in their dealings with venture capitalists. With respect to the first objective, the value of the study may perhaps be as much in what it did not achieve as in what it did achieve. A five-step model of the activities of venture capitalists has been developed. The model, however, is highly descriptive and lacks a theoretical basis. Moreover, the model is admittedly simplistic. The second objective is to provide potential entrepreneurs with insight into the way venture capitalists manage their funds. These insights are also valuable to managers in large companies who wish to improve their allocation of resources to internal ventures competing for new business development funds.
Even though the formal venture capital industry is a major source of financing, particularly second- and third-stage financing, some of the aspects of the investment decision have been little researched. One aspect in particular is the nature and extent of intuitive, “personal chemistry” or “gut feel” decisions involved; these are frequently mentioned as important by venture capitalists themselves, but have been little researched by workers in the field.In order to develop an understanding of intuition, this study employed a unique technique—the repertory grid—drawn from personal construct psychology. Using this technique, the ways in which venture capitalists construe (think about or ascribe personal meaning to) investment proposals were identified in a series of in-depth interviews.The results indicate that investment decision constructs can be grouped into three areas—management, unique opportunity and appropriate return, the first two areas involving the largest number of constructs reflecting such concerns as the experience of the principal, the personality and background of the principal, the characteristics of the management team, the “interpersonal chemistry” involved and a preference for a pragmatic rather than creative entrepreneur. Principal component analyses indicate the relationships between these concerns and reveal relatively low cognitive complexity: essentially, just one or two major areas of emphasis predominate in each venture capitalist's thinking.Notwithstanding these general trends across the venture capitalists studied, cluster analysis showed that each venture capitalist had his own way of structuring the institutions involved in an investment decision. These findings suggest that individuals seeking venture capital might need to adjust their approach to different venture capitalists, recognizing the diversity involved.
Various aspects of research about information on small business are discussed. It is found that NewsRoom, Dialog's newest entrant in the news database marketplace, eschews small business as a descriptor term, preferring instead small firms. The decision of Dun & Bradstreet to withdraw the bulk of valuable information from its Small Business Solutions site is also elaborated.
Venture capital (VC) has had a profound impact on the U.S and world economies. The landmarks of venture capitalism are the formation of the venture capital fund ARD in 1946 and the establishment of small business investment companies by the U.S. Small Business Administration in 1958. After a boom in the 1960s, the VC industry all but collapsed between 1970 and 1977. The VC industry revived in the 1980s and reached a peak in 1987 from which it declined. At the moment of its decline in 1990, the industry was radically altered and transformed and was at a crossroads from its recent shake-out. This book examines the state of the VC industry at this point in 1990, examining current trends, developments, and practices, and looking at future prospects for the industry, suppliers, and users of risk capital, as well as the nation's economy as a whole. The VC industry has been transformed by two changes. (1) New and specialized financial and investment strategies emphasize deal making, transaction crafting and closing, fee generating, and short-term gains. This "merchant capital" approach is oriented to investing in established firms, as opposed to the classic VC approach of providing equity financing in new, emerging, innovating, and technology-based firms. This change may be due to professionals entering the field from MBA backgrounds rather than business-building backgrounds. (2) The altered market has resulted in reduced opportunities, globalization, increase in available capital, and dominance of institutional money, and the VC industry is losing its classic company-building skills. The major virtue of the traditional VC industry, which has been a wellspring of innovation and great rewards, is the skills brought by the venture capitalists that add value in the firm's forming, building, and harvesting. Changes in the VC industry are seen in an explosion of investing activity, heterogeneity of industry structure, niche funds, declines in rate of return, and increased competition and shake-out. Examples of classic revolutionary industries financed by VC are the semiconductor, computer, and biotechnology industries. Some lessons from these industries are drawn. Lessons are also drawn from the case of the Winchester disc-drive industry, which represents a case of "capital market myopia." Historical VC returns have been in the 10% to 20% range, occasionally in the 20% to 30% range, and rarely higher. The main reason for the unsatisfactory returns on VC since 1983 has been the initial public offering (IPO) drought. The benefits and implications for the VC industry of syndicated investments are examined. The contribution of VC to economic development is explored in terms of internal and external factors. Some high-tech regions were not planned; some planned regional centers have failed. Three factors affect the flow of VC: investors who put up the money, entrepreneurs who form the company, and the venture capitalists. The value-added of classic VC investment lies in the guidance, contracts, know-how, and support of the backers. The relationship between the venture capitalist and management team critically affects the success of the venture. Also examined are relationships between flows of VC and public policy, capital markets, new technologies, and changes in industries. Most important in fostering VC are government policies. Since VC is vital element to entrepreneurship, the U.S. must actively foster classic venture capital by changing some national attitudes and policies in culture, education, and role of government, for which recommendations and suggestions are offered. (TNM)
In 2009, the number of people reporting entry into entrepreneurial activity in the United States reached its highest point over the last fourteen years. This increased rate of entrepreneurship was seen across most demographic categories, with the largest increases coming among older individuals and African-Americans. While the West continues to have a higher rate of entrepreneurship than other parts of the country do, it showed a sharp decline in 2008. These trends and many more are discussed here in the Kauffman Index of Entrepreneurial Activity, the leading indicator of new business creation in the United States.Capturing new business owners in their first month of significant business activity, this measure provides the earliest documentation of new business development across the country. The percentage of the adult, non-business-owner population that starts a business each month is measured using data from the Current Population Survey (CPS). In addition to this overall rate of entrepreneurial activity, separate estimates for specific demographic groups, states, and select metropolitan statistical areas (MSAs) are presented. The Index provides the only national measure of business creation by specific demographic groups.New 2009 data allow for an update to previous reports, with consideration of trends in the rates of entrepreneurial activity over the fourteen-year period between 1996 and 2009. The Kauffman Index reveals important shifts in the national level of entrepreneurial activity and shifts in the demographic and geographic composition of new entrepreneurs across the country. Key findings for 2009 include:• In 2009, 0.34 percent of the adult population (or 340 out of 100,000 adults) created a new business each month, representing approximately 558,000 new businesses per month. The 2009 entrepreneurial activity rate represents an increase over the 2008 rate of 0.32 percent and represents the highest level over the past decade and a half.• Overall, men are substantially more likely to start businesses each month than are women. The entrepreneurial activity rate for men increased slightly from 0.42 percent in 2007 to 0.43 percent in 2008. The Kauffman Index for women also increased slightly, from 0.24 percent to 0.25 percent.• The entrepreneurial activity rate among African-Americans increased from 0.22 percent in 2008 to 0.27 percent in 2009, reaching the highest level over the past decade and a half. • The Latino entrepreneurial activity rate decreased from 0.48 percent in 2008 to 0.46 percent in 2009, and the Asian entrepreneurial activity rate decreased from 0.35 percent in 2008 to 0.31 percent in 2009. The non-Latino white business-creation rate increased from 2008 to 2009 (0.31 percent to 0.33 percent).• The immigrant rate of entrepreneurial activity declined slightly from 0.53 percent in 2008 to 0.51 percent in 2009, but remained substantially higher than the native-born rate of 0.30 percent.• The oldest age group (ages fifty-five to sixty-four) experienced the second-largest increase in business-creation rates from 2008 to 2009, contributing to a two-year upward trend. Among this group, entrepreneurial activity rose from 0.36 percent to 0.40 percent. The age group thirty-five to forty-four also experienced a large increase in entrepreneurial activity from 2008 to 2009 (0.35 percent to 0.40 percent). The youngest age group (twenty to thirty-four) has a substantially lower entrepreneurship rate (0.24 percent).• Entrepreneurship rates increased the most for college-educated individuals (0.31 percent to 0.34 percent), and high school individuals (0.35 percent to 0.38 percent) in 2009. • The construction industry had the highest rate of entrepreneurial activity of all major industry groups in 2009 (1.55 percent). The second highest rate of entrepreneurial activity was in the services industry (0.42 percent).• The entrepreneurial activity rate declined sharply in the West, from 0.42 percent in 2008 to 0.38 percent in 2009. Business creation rates increased in the Midwest and South, but the West continues to have the highest rates.• The states with the highest rates of entrepreneurial activity were Oklahoma (470 per 100,000 adults), Montana (470 per 100,000 adults), Arizona (460 per 100,000 adults), Texas (450 per 100,000 adults), and Idaho (450 per 100,000 adults). The states with the lowest rates of entrepreneurial activity were Mississippi (170 per 100,000 adults), Nebraska (200 per 100,000 adults), Pennsylvania (200 per 100,000 adults), Alabama (210 per 100,000 adults), and Minnesota (220 per 100,000 adults).• The states experiencing the largest increases in entrepreneurial activity rates over the past decade were Georgia (0.20 percentage points), Arizona (0.14 percentage points), Tennessee (0.13 percentage points), District of Columbia (0.12 percentage points), and Massachusetts (0.10 percentage points). The states that experienced the largest decreases in their rates were New Mexico (-0.20 percentage points), Alaska (-0.15 percentage points), North Dakota (-0.12 percentage points), and Nebraska (-0.10 percentage points).• Among the fifteen largest MSAs in the United States, the highest entrepreneurial activity rate in 2009 was in Houston (0.63 percent). The large MSA with the lowest rate of entrepreneurial activity was Seattle (0.16 percent).
This study investigates whether VCs' assessment policies of new venture survival are consistent with those arising from the strategy literature (using two established strategy perspectives). Strategy scholars suggest the nature of the markets, competition, and decisions made by the management team affect a new venture's survival chances. The findings demonstrate that VCs' assessment policies are predominantly consistent with those proposed by strategy scholars---providing insight into why VCs consider certain criteria in their assessment of new venture survival as well as why some criteria are more important in their assessment than others. Through this increased understanding of venture capitalists' decision making, entrepreneurs seeking capital may be better able to address their requests for funding to those criteria venture capitalists find most critical to the survival of a new venture. Venture capitalists may use these findings to better understand their own decision making process, which, in turn, provides the opportunity to increase evaluation efficiency.
In recent years evaluators of educational and social programs have expanded their methodological repertoire with designs that include the use of both qualitative and quantitative methods. Such practice, however, needs to be grounded in a theory that can meaningfully guide the design and implementation of mixed-method evaluations. In this study, a mixed-method conceptual framework was developed from the theoretical literature and then refined through an analysis of 57 empirical mixed-method evaluations. Five purposes for mixed-method evaluations are identified in this conceptual framework: triangulation, complementarity, development, initiation, and expansion. For each of the five purposes, a recommended design is also presented in terms of seven relevant design characteristics. These design elements encompass issues about methods, the phenomena under investigation, paradigmatic framework, and criteria for implementation. In the empirical review, common misuse of the term triangulation was apparent in evaluations that stated such a purpose but did not employ an appropriate design. In addition, relatively few evaluations in this review integrated the different method types at the level of data analysis. Strategies for integrated data analysis are among the issues identified as priorities for further mixed-method work.
Equity investments in entrepreneurial firms continue to grow in number and dollar amount from both venture capital and private investment sources. Increasingly, these two sources of capital play an important role in the development of new and existing entrepreneurial ventures. Due to the sometimes hurried attempt to turn their dream into reality, entrepreneurs may fail to consider similarities and differences in the value-added benefits supplied by venture capital firms (VCs) and private investors (PIs).Accordingly, the purpose of this study was to determine how initial relationships are established and maintained between entrepreneurs and their primary investors. Specifically, we asked entrepreneurs to assess characteristics of the relationship with their primary investor. We then contrasted the results between entrepreneurial firms that had received venture capital funding versus private investor funding. Differences were examined along the following lines: 1.• Levels of investor involvement in entrepreneurial firms2.• Reporting and operational controls placed on the firm3.• Types of expertise sought by the entrepreneur
This paper presents the results of the first study of the informal venture capital market in the United Kingdom, and compares the characteristics and behaviour of informal investors in the U.K. and North America. Although similar to their U.S. counterparts in demographics (with the exception of age, as U.K. informal investors are significantly older than those in the U.S.), U.K. informal investors invest less, operate independently rather than in syndicated investments, have somewhat higher rate of return and capital gain expectations and are less satisfied overall with the performance of their portfolios. U.K. investors also receive information on and seriously consider more investment opportunities, but do not make any more investments than their U.S. counterparts. Overall, in comparison to the U.S. market, the U.K. venture capital market appears to operate less effectively, thereby reducing its potential contribution to venture financing. The paper concludes with a call for more extensive international comparative studies of informal venture capital as a first step to increasing both the breadth and depth of knowledge of the operation and characteristics of this market.
Venture Capitalists responded to a questionnaire in which they rated a highly successful and a highly unsuccessful venture on 25 screening criteria and on several performance criteria. In all, 150 ventures were rated by 67 venture capital firms.Cluster analysis revealed three broad classes of unsuccessful ventures. The first type is the bane of all venture capitalists—the venture in which the venture team is lacking in experience or staying power, the product has no prototype, and there is no clear market demand for the product, yet the venture somehow slips through the screens and gets funded. The second type is one in which the venture team is very well credentialed, but the venture faces early competition and the team has no staying power and runs out of steam. The third major class of venture is one in which the team has exceptional staying power, so much so that by perserverance it demonstrates that a market exists, only to lose that market to competition because of a lack of protection for the product.Cluster analysis also showed that there are four broad classes of successful ventures. First is the high-tech venture with a well-qualified venture team that has the staying power needed to face competitive attack. Second is the class of venture where the venture team does not have much in the way of credentials, but the product has a very high level of protection and turns out to be highly successful. Third is a class of “market makers”—a venture team with exceptional perseverance that demonstrates that there is in fact a market for the product, but also has some form of product protection once that market has been demonstrated.It can be seen that each of these classes of successes has a look-alike class of failures that is very similar except for some flaw in the venture team.A final class of successful venture is a small group of low-tech products in which distribution skills are critical. We suspect that these ventures tend to be for consumer goods.An important finding is the identification of two major criteria that are predictors of venture success. These are 1) the extent to which the venture is initially insulated from competition and 2) the degree to which there is demonstrated market acceptance of the product. Regression analyses indicate that only these two screening criteria correlate pervasively across several performance criteria. Interestingly, neither of these criteria were rated as essential in an earlier study. Much more importance needs to be attached to these criteria in screening venture proposals.The final analysis was a factor analysis, which indicates that the 150 ventures were screened according to five major classes of criteria, each class corresponding to some facet of risk management of the venture. These were as follows: 1.1. Criteria that screen out ventures where there is a risk of failure due to unqualified management;2.2. Criteria that screen out management that may well be qualified but lack experience;3.3. Criteria that screen out ventures where basic viability of the project is in doubt;4.4. Criteria that screen out ventures where there is high exposure to competitive attack and profit erosion before the investment can be recouped;5.5. Finally, criteria that avoid ventures that lock up the investment so that it cannot be cashed out for long periods of time.
A questionnaire was administered to one hundred venture capitalists to determine the most important criteria that they use to decide on funding new ventures. Perhaps the most important finding from the study is direct confirmation of the frequently iterated position taken by the venture capital community that above all it is the quality of the entrepreneur that ultimately determines the funding decision. Five of the top ten most important criteria had to do with the entrepreneur's experience or personality. There is no question that irrespective of the horse (product), horse race (market), or odds (financial criteria), it is the jockey (entrepreneur) who fundamentally determines whether the venture capitalist will place a bet at all.
This paper examines a survey of thirty United Kingdom Venture Capital funds, representing the upper end of the size spectrum of the industry. The survey identified the techniques used by Venture Capitalists in the appraisal of investment proposals. Attention is drawn to the difficulties associated with the information asymmetry facing potential investors. There is a scrutiny of the due diligence strategy employed by investors in proposals requiring finance that exhibit the distinctive characteristics of start-up and development.The survey responses demonstrate the lack of precision of the appraisal process and advocate more accurate evaluation procedures, which may result in supplementary investment opportunities becoming acceptable.
Investment by wealthy individuals, known as ‘angels,’ in startup firms is quite significant and has taken off in the last few years. Angels invest in the company at an earlier stage than venture capitalists (VCs) do. This paper examines the relationship between an entrepreneur, an angel, and a VC from the seed investment made by the angel to the exit stage. The study characterizes the equilibrium contracts among the players and provides insights into the related institutional arrangements. Next, the study examines the signaling aspects of the game. The paper also analyzes the moral hazard problems of the entrepreneur and the VC. It shows that the outcome in a startup firm is not efficient because of the free-rider phenomenon.
Contenido: Parte I.Cuestiones conceptuales en la investigación cualitativa: Naturaleza de la investigación cualitativa; Temas estratégicos en la investigación cualitativa; Diversidad en la investigación cualitativa: orientaciones teóricas; Aplicaciones cualitativas particulares. Parte II. Diseños cualitativos y recolección de datos: Estudios de diseños cualitativos; Estrategias de trabajo de campo y métodos de observación; Entrevistas cualitativas. Parte III. Análisis, interpretación e informe: Análisis cualitativo e interpretación; Incrementar la calidad y la credibilidad del análisis cualitativo.
Contenido: I. La oportunidad: 1. La revolución emprendedora; 2. El proceso del emprendedor; 3. La oportunidad: creación, modelado, reconocimiento y dimensionamiento; 4. Investigación de las oportunidades de la empresa; 5. Emprendedores y la continua revolución de Internet: la frontera que se expande; 6. Franquicias; II. Los fundadores: 7. Mente emprendedora en pensamiento y acción; 8. El gerente emprendedor; 9. El nuevo equipo de la aventura; 10. La ética personal y el emprendedor; III. Recursos necesarios: 11. Recursos necesarios; 12. El plan del negocio; IV. Financiamiento de las empresas emprendedoras: 13. Financiamiento del emprendimiento; 14. Obtención de capital para la aventura y el crecimiento; 15. El trato: valuación, estructura y negociación; 16. Obtención de capital de deuda; V. Iniciar y continuar: 17. Administración del crecimiento rápido: emprendimiento más allá del inicio; 18. El emprendedor y la compañía problemática; 19. La cosecha y más allá; 20. Crear una estrategia emprendedora personal.
Research and development at the nanoscale requires a large degree of integration, from convergence of research disciplines in new fields of enquiry to new linkages between start-ups, regional actors and research facilities. Based on the analysis of two clusters in nanotechnologies (MESA+ (Twente) and other centres in The Netherlands and Minatec in Grenoble in France), the paper discusses the phenomenon of technological agglomeration: co-located scientific and technological fields associated to coordinated technology platforms to some extent actively shaped by institutional entrepreneurs. Such co-location and coordination are probably a prerequisite for the emergence of strong nanoclusters
Risk capital is a resource essential to the formation and growth of entrepreneurial ventures. In a society that is increasingly dependent upon innovation and entrepreneurship for its economic vitality, the performance of the venture capital markets is a matter of fundamental concern to entrepreneurs, venture investors and to public officials. This article deals with the informal venture capital market, the market in which entrepreneurs raise equity-type financing from private investors, (business angels). The informal venture capital market is virtually invisible and often misunderstood. It is composed of a diverse and diffuse population of individuals of means; many of whom have created their own successful ventures. There are no directories of individual venture investors and no public records of their investment transactions. Consequently, the informal venture capital market poses many unanswered questions.
Research and development at the nanoscale requires a large degree of integration, from convergence of research disciplines in new fields of enquiry to new linkages between start-ups, regional actors and research facilities. Based on the analysis of two clusters in nanotechnologies (MESA+ (Twente) and other centres in The Netherlands and Minatec in Grenoble in France), the paper discusses the phenomenon of technological agglomeration: co-located scientific and technological fields associated to coordinated technology platforms to some extent actively shaped by institutional entrepreneurs. Such co-location and coordination are probably a prerequisite for the emergence of strong nanoclusters
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