The study extends the literature on venture capital by examining whether entrepreneur’s choice for an external investor and certain firm characteristics have an impact on venture success or not. The focus is set on the differences in value creation by venture capitalists and business angels for ventures of the high- and low-technology sector. The assessment of a data set including 252 Series A financing rounds by venture capitalist firms, business angels and collaborative investments of both investors conducted between 2005 and 2012 unveils value enhancing aspects for all three financing solutions. Overall, start-ups initially financed by venture capitalist firms perform best with regard to general venture success (exit and survival rates), whereas start-ups collaboratively supported by venture capitalists and business angels have the highest chances to exit successfully through a trade sale. It becomes further apparent that ventures located in one of the high-technology industries ‘internet’, ‘pharmaceuticals’ and ‘high-tech’, ventures that are longer established in the market and ventures whose Series A financing round was executed more recently indicate an enhanced likelihood of success.
Inhaltsverzeichnis (Table of Contents)
- 1 Introduction
- 1.1 Purpose
- 1.2 Structure of the study
- 2 The venture capital market
- 2.1 The entrepreneurial perspective
- 2.2 Business angels
- 2.3 Venture capitalists
- 2.4 Corporate venture capitalists
- 2.5 High- and low-technology ventures
- 2.6 The principal-agent problem - Venture capital contracting
- 3 Literature review and Hypotheses development
- 3.1 Value creation of business angels
- 3.2 Value creation of venture capitalists
- 3.3 Complementarities
- 4 Data and Methodology
- 4.1 Data selection
- 4.2 Scientific approach
- 4.3 Determinants of success and failure
- 5 Empirical results
- 5.1 Sample summary
- 5.2 Odds ratios
- 5.3 Logit regression
- 5.3.1 Binary logit regression
- 5.3.2 Multinomial logit regression
- 5.4 Hypotheses testing
- 6 Discussion
- 7 Conclusion, limitations and implications
- 7.1 Conclusion
- 7.2 Limitations
- 7.3 Implications
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This study investigates the impact of an entrepreneur's choice of external investor and firm characteristics on venture success. It focuses on the differences in value creation between venture capitalists and business angels for high- and low-technology ventures. The research aims to analyze the success rates (exit and survival) of startups financed by different investor types.
- Venture capital financing choices (business angels vs. venture capitalists)
- Value creation by different investor types
- Impact of firm characteristics on venture success
- Success metrics (exit and survival rates)
- High-technology vs. low-technology ventures
Zusammenfassung der Kapitel (Chapter Summaries)
1 Introduction: This chapter introduces the topic of start-up financing, highlighting the crucial role of external funding and the challenges entrepreneurs face in accessing capital. It sets the stage by discussing the choices entrepreneurs have between different types of investors, such as business angels and venture capitalists, each offering unique advantages and disadvantages. The chapter also establishes the research gap regarding quantitative studies on business angel investments, emphasizing the lack of readily available data and the confidential nature of these transactions.
2 The venture capital market: This chapter provides a detailed overview of the venture capital market, exploring the perspectives of entrepreneurs and the different types of investors involved. It differentiates between business angels, venture capitalists, and corporate venture capitalists, highlighting their unique characteristics and approaches to investment. The chapter also delves into the distinctions between high- and low-technology ventures, and examines the principal-agent problem inherent in venture capital contracting.
3 Literature review and Hypotheses development: This chapter reviews existing literature on the value creation mechanisms of business angels and venture capitalists. It synthesizes findings on how each type of investor contributes to the success of ventures, highlighting the potential complementarities between them. Based on this review, the chapter develops specific hypotheses to be tested in the empirical analysis.
4 Data and Methodology: This chapter details the data selection process and the scientific approach employed in the study. It explains the criteria used to select the sample of 252 Series A financing rounds and outlines the methods for analyzing the data, focusing on determinants of venture success and failure. The methodology used is clearly defined, enabling reproducibility and scrutiny of the study's findings.
5 Empirical results: This chapter presents the findings from the empirical analysis of the data. It summarizes the sample characteristics, presents odds ratios, and reports the results of both binary and multinomial logit regressions. The chapter focuses on testing the hypotheses developed earlier and interpreting the statistical significance of the findings.
6 Discussion: This chapter provides a detailed discussion of the empirical results and their implications. The chapter will analyze the significance of the findings in relation to the research questions and hypotheses outlined in earlier chapters. This section will also incorporate an analysis of potential limitations and unexpected observations of the study.
Schlüsselwörter (Keywords)
Venture capital, business angels, entrepreneurship, start-up financing, high-technology ventures, low-technology ventures, value creation, principal-agent problem, venture success, exit, survival, empirical analysis, logit regression.
Frequently Asked Questions: A Study on Venture Capital and Business Angel Investments
What is the main focus of this study?
This study investigates how an entrepreneur's choice of external investor (business angel vs. venture capitalist) and firm characteristics affect the success of a venture. It specifically analyzes the differences in value creation between these two investor types for high- and low-technology ventures, examining success rates (exit and survival) of startups financed by them.
What are the key themes explored in the study?
The study explores venture capital financing choices, value creation by different investor types, the impact of firm characteristics on venture success, success metrics (exit and survival rates), and the comparison between high-technology and low-technology ventures.
What types of investors are compared in this research?
The study compares business angels and venture capitalists, also including a look at corporate venture capitalists, highlighting their unique characteristics and investment approaches.
What is the methodology used in this study?
The study uses a quantitative approach. The data selection process involves a sample of 252 Series A financing rounds. The analysis employs odds ratios and both binary and multinomial logit regressions to test hypotheses regarding venture success and failure determinants.
What are the key findings of the empirical analysis?
The empirical results chapter presents a sample summary, odds ratios, and the results of binary and multinomial logit regressions. The chapter focuses on testing the hypotheses developed earlier and interpreting the statistical significance of the findings. A detailed discussion of the implications of these results is provided in a separate chapter.
What are the limitations of this study?
The limitations of the study are discussed in the conclusion chapter, acknowledging potential shortcomings and providing context for interpreting the findings.
What are the implications of this research?
The implications of the study, based on the empirical findings and their discussion, are presented in the conclusion chapter, highlighting the practical significance of the research for entrepreneurs and investors.
What is the structure of the study?
The study follows a structured format including an introduction, a review of the venture capital market, a literature review and hypothesis development, the data and methodology used, the empirical results, a discussion of the findings, and finally, a conclusion with limitations and implications.
What are the key words associated with this study?
Venture capital, business angels, entrepreneurship, start-up financing, high-technology ventures, low-technology ventures, value creation, principal-agent problem, venture success, exit, survival, empirical analysis, logit regression.
Where can I find more detailed information about each chapter?
Chapter summaries providing an overview of the content and focus of each chapter are provided in the document. Each chapter delves into greater detail on its specific topic.
What is the purpose of this study?
The study aims to analyze the success rates (exit and survival) of startups financed by different investor types (business angels vs. venture capitalists), focusing on the impact of investor choice and firm characteristics on venture success.
- Citar trabajo
- Daniel Schmidt (Autor), 2013, Entrepreneur's Choice between Venture Capitalist and Business Angel for Start-Up Financing, Múnich, GRIN Verlag, https://www.grin.com/document/230839
