Venture Capital Financing of U.S., UK, German and French IT Start-ups

A Comparative Empirical Research of the Investment Process on the Venture Capital Firm Level

Doctoral Thesis / Dissertation , 2011 , 294 Pages

Business economics - Investment and Finance

Independent Venture Capital (IVC) has been paramount in the emergence of the information technology industry in both the United States and Europe. There are relatively few large global information technology companies in Europe. A widening gap is observable in the success rate of IVC backed start-ups between the U.S. and Europe in the information technology industry. This difference could be attributable to the differences in the venture capital financing of start-ups in the U.S., UK, Germany and France. This book deals with "Differences in Venture Capital Financing of U.S., UK, German and French Information Technology Start-ups". The comparative analysis is conducted on a microeconomic level (managerial venture capital research), i.e. on the venture capital firm level.

The differences are analyzed for the whole venture capital investment cycle: contact phase, initial screening phase, due diligence phase, deal structuring and negotiation phase, management phase — value adding services, and exit phase. The research framework model examines the following differences in the venture capital investment cycle: average size of investment in the seed stage, average size of investment in the start-up stage, aver-age size of investment in the growth stage, percentage of start-ups in pre-revenue phase at time of investment, percentage of start-ups not managed by founders but experienced managers, percentage of investment in start-ups with me-too products, percentage of mar-ket analysis due diligence done informal, typical liquidation preference multiple, percent-age syndicated exits that are outperformers, number of tranches per investment round, number of board seats per partner and the cash multiple X that defines an outperformer. The empirical research work is based on an extensive scientific online questionnaire with VCs in the U.S., UK, Germany and France. Before the online questionnaire was drafted, a preliminary face-to-face expert interview was conducted with 24 VCs in Silicon Valley, London, Paris, Hamburg, Berlin and Munich. The primary data collected in the questionnaire served as basis for quantitative parametric and non-parametric statistical analysis.

The book is bespokenly written for decision makers in the venture capital industry in the U.S, UK, Germany and France; all entrepreneurs and professionals who want to under-stand the economics and mechanics of venture capital term sheet clauses; venture capital industry professionals; VC associations

Inner Page

3. Date of Disputation: 14.03.2011

4. University of Kassel, Business Economics Faculty

5. Doctoral Dissertation, University of Kassel, Business Economics Faculty for the degree of Dr. rer. pol. (rerum politicarum)

Acknowledgement

I hereby first and foremost express great gratitude to my primary academic supervisor Prof. Dr. Klaus Nathusius for all the academic consultation and structural support from April 2008 to March 2011. He was available in-person for discussions and most importantly always promptly responded to e-mails within three days. The completion of the written doctoral dissertation in two years was only possible because of Prof. Nathusius` fast reaction to e-mails. In addition, I commend Prof. Nathusius for organizing the quarterly colloquium where all doctoral candidates gave presentations on the status of their research work. The colloquium was always useful to attend and very effectual to the progress of my doctoral dissertation. I really enjoyed exchanging ideas with other doctoral candidates there.

I appreciate Prof. Dr. Rainer Stöttner for taking over the role of secondary academic supervisor. I owe Jutta Salzmann, Alexander Kampe and Martina Tisafalvi a lot for providing a seamless, impeccable and timely administrative support over the three years.

I am highly indebted to the following libraries for granting me a full free access to literature resources: Penrose Library, DU Denver; Perry-Castaneda Library, UT Austin; Boatwright Library, University of Richmond; Jackson Library, Stanford University; University Library, University of Cologne. I am obliged to the following venture capital associations for providing me a full free access to their publication database: John Taylor from National Ventura Capital Association (NVCA), Scott Sage from British Venture Capital Association (BVCA), Ewa Ly from Association Française des Investisseurs en Capital (AFIC), Attila Dahmen from Bundesverband Deutscher Kapitalbeteiligungsgesellschaften (BVKAP) and Dan Magirescu from European Venture Capital Association (EVCA).

I am very grateful to all the venture capital firms in the U.S., UK, Germany and France that partook in the scientific online survey in early 2009. Moreover, I am sincerely beholden to the 24 venture capital firms in Silicon Valley, London, Paris, Hamburg, Munich and Berlin that participated in the face-to-face 30 minutes expert interviews, which were instrumental in designing the underlying research framework model of the doctoral dissertation.

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• College: University of Kassel (Research Group Entrepreneurship)
• Author: Michael Jurgen Garbade (Author)
• Publication Year: 2011
• Pages: 294
• Catalog Number: V170334
• ISBN (eBook): 9783640893270
• ISBN (Book): 9783640893164
• Language: English
• Tags: Venture Capital, start-ups, Term Sheet, venture capital financing, differences in venture capital financing, venture capital in US vs. Europe, VC financing, venture capital investment, VC investment cycle, venture capital in Europe, venture capital in U.S., venture capital in UK, venture capital in Germany, venture capital in France, angel in-vesment, VC funding