When startups exit: comparing strategies in Europe and the USA

2018 ◽  
Vol 39 (3) ◽  
pp. 26-33 ◽  
Author(s):  
Alessia Pisoni ◽  
Alberto Onetti
Keyword(s):  
Early Stage ◽  
High Growth ◽  
High Tech ◽  
Venture Capitalists ◽  
Content Type ◽  
Early Exit ◽  
Start Up ◽  
The Usa ◽  
Local Companies ◽  
Start Ups

Purpose The purpose of this paper is to present an overview of trends toward start-up exits. Exits represent the “end phase” of the start-up process, at least for the founders and the early investors. For high-growth venture-capital-backed companies, exits are often considered the ultimate goal of building a profitable venture. These ventures are intended from the beginning to harvest the financial value created by the business at some point in the future, and return capital to early investors. Design/methodology/approach The authors tracked 5,744 merger and acquisition transactions that have occurred between European and US tech start-ups since 2012. Data are drawn from CrunchBase, the most comprehensive database of high-tech companies and investors with information on the companies and investors around the world. The authors then compared the trends of acquisitions between European and US companies. Findings Results show that US companies are far more inclined to make acquisitions than European ones. Acquirers of start-ups, both from Europe and the US, prefer to buy local companies. However, recently, US companies have started to show more interest in European start-ups. Thus, signaling that the European start-up ecosystem is growing and becoming more attractive for US buyers. Furthermore, results show that start-up exits typically happen within a few years after a company’s establishment. Research limitations/implications The research does not take into consideration the price of the transaction, or the amount of capital invested by venture capitalists in the high-tech start-ups that have been acquired. Further research should address this specific problem by helping European start-ups understand how to plan the exit phase within few years from establishment. Practical implications The results have important implications both for entrepreneurs/managers and policymakers. Early exit appears to be a global trend among start-ups. This suggests that the exit phase should be properly planned to happen in the very early stage of the start-up process. On the other hand, the research also shows that there is still a gap to be filled in the European start-up ecosystems’ ability to produce exits and create new large innovative companies (the so-called “unicorns”). Originality/value To date, there has been a little research about exits for young high-tech ventures. This paper will attempt to shed new light on this so far under-explored issue by specifically analyzing exits as financial strategy for investors and entrepreneurs.

scholarly journals Understanding the accelerator from resources-based perspective

2018 ◽  
Vol 12 (3) ◽  
pp. 258-278 ◽  
Author(s):  
Chul Hyun Uhm ◽  
Chang Soo Sung ◽  
Joo Yeon Park
Keyword(s):  
Early Stage ◽  
Point Of View ◽  
Success Rates ◽  
Access To Resources ◽  
Content Type ◽  
Study Approach ◽  
Start Up ◽  
The Usa ◽  
Start Ups

Purpose This study aims to explore Accelerators and their practices in sustaining start-ups within their innovative programs for these companies based on the resource-based perspective. Moreover, with an ever-increasing demand for Accelerators amongst start-up companies, this study also demonstrates the importance of Accelerators, as it pertains to new venture creation. Design/methodology/approach This research uses an exploratory case study approach to examine a comparative view of leading Accelerator companies in the USA and Korea based on resource support. Findings The results of this study show that there are a number of differences between Accelerators of the two countries in terms of the resources they support for early-stage start-ups. The findings also show some similarities. However, in Korea, the Accelerator landscape is limited, where mentorship, resources and investments are not readily accessible, resulting in low success rates for Korean start-up companies. These limitations have had a negative trickle-down effect when providing entrepreneurs with strong access to resources and investors, which highly affects the success rates of early-stage start-ups. Practical implications In terms of the resource-based theory, this study contributes to the growth of early start-ups by emphasizing the role of the accelerator and suggesting the extent and impact that entrepreneurs have access to resources and investors. Originality/value With significant growth in start-ups around the world, the necessity for start-up funding and mentorship has increased drastically. Start-up companies need various types of assets, systems, knowledge and information to achieve their goals. In Accelerators, start-ups receive all the aforementioned resources while also improving their entrepreneurial skills. Start-up companies have many options in seeking investors who support both tangible and intangible resources to boost growth. While there is a wealth of information on traditional funding methods, there are few studies that shed light on the role of Accelerators from the resource-based point of view.

scholarly journals The early growth of start-ups: innovation matters. Evidence from Italy

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Raffaele Fiorentino ◽  
Sergio Longobardi ◽  
Alessandro Scaletti
Keyword(s):  
Propensity Score ◽  
Propensity Score Matching ◽  
Firm Growth ◽  
Ad Hoc ◽  
Early Stage ◽  
New Ventures ◽  
Objective Measure ◽  
Content Type ◽  
Start Up ◽  
Start Ups

PurposeDespite the relevance of innovation in entrepreneurship literature, empirical research on the innovation-performance relationship in start-ups is underdeveloped and shows controversial results. To bridge this gap, the aim of this paper is to investigate the role of innovativeness on new venture performance in the early stage of the life cycle.Design/methodology/approachRegression modelling and propensity score matching are used to reveal systematic differences in growth between innovative start-ups (ISUPs) and non-innovative start-ups. We use an ad hoc dataset obtained through merging the financial database AIDA with data from administrative sources (Italian Chambers of Commerce and the Italian Ministry for Economic Development).FindingsThe results show that differences in growth can be explained by the different levels of innovativeness in new ventures. Moreover, unlike in prior studies, the innovation inputs matter more than innovation outputs. Indeed, the results support the idea that innovation policies can contribute to maximising the potential of start-ups.Practical implicationsThe findings provide suggestions for policy makers and entrepreneurs to help firms configure ex ante appropriate actions to support the growth of new ventures in the start-up stage.Originality/valueThis study is the first to use the new objective measure of start-up innovation, available from the Italian LD 221 register. Second, different types of innovation are investigated as antecedents of firm growth. Third, we employ propensity score matching, which favours revealing systematic differences in growth between ISUPs and non-innovative start-ups. Fourth, the results of our study are the first to offer evidence on the effectiveness of the new Italian sustaining ISUPs policy.

Enterprise survival in the high-tech community: persuasion and power in board decisions

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ronit Yitshaki ◽  
Eli Gimmon ◽  
Susanna Khavul
Keyword(s):  
High Tech ◽  
Structured Interviews ◽  
Board Size ◽  
Term Survival ◽  
Long Term Survival ◽  
Content Type ◽  
Board Processes ◽  
Start Up ◽  
Start Ups

Purpose This study aims to examine the extent to which board size, the use of power by venture capital investors and entrepreneurs’ interpersonal tactics such as persuasion to sway board decisions, influence the long-term survival of start-ups. Design/methodology/approach This study used a mixed-methods approach. The quantitative part is based on data collected from 179 chief executive officers (CEOs) of high-tech start-ups community financed by venture capitalists (VCs) in Israel of which 59 did not survive. To achieve a better understanding of these findings, semi-structured interviews with 12 entrepreneurs were conducted. Findings Smaller boards were positively associated with venture survival. The use of power by VC investors positively influenced start-up survival. CEO persuasion had a negative effect on venture survival; however, its interaction with board size suggests that it had a lesser effect on very small boards. Practical implications Although investors’ control over decision-making contributes to long-term survival, entrepreneurs should be aware of the possible detrimental effects of exercising a high level of persuasion in board processes. The findings also suggest that a small board size is preferable for start-up survival. Originality/value Exploring the effect of board processes on venture survival is considered complex. A unique sample of high-technology start-ups consisting of both surviving and failed start-ups was analyzed to explore the effects of persuasion and power in board processes.

Journey's end: a dynamic framework of entrepreneurial processes and capitals relating to early stage business exit

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Richard Hanage ◽  
Pekka Stenholm ◽  
Jonathan M. Scott ◽  
Mark A.P. Davies
Keyword(s):  
Case Studies ◽  
Early Stage ◽  
Theory Building ◽  
Cross Sectional ◽  
Content Type ◽  
Dynamic Framework ◽  
Longitudinal Dynamic ◽  
Start Up ◽  
New Business ◽  
Start Ups

PurposeThe purpose of this paper is to respond to the call by McMullen and Dimov (2013) for a clearer understanding of entrepreneurial journeys by investigating the entrepreneurial capitals and micro-processes of seven young early stage entrepreneurs who all exited their businesses within 3 years of start-up.Design/methodology/approachThe authors analysed empirical data from concurrent in-depth interviews which generated rich longitudinal case studies. Theory-building then led to a proposed “Longitudinal Dynamic Process Framework” of entrepreneurial goals, processes and capitals.FindingsThe framework builds on prior studies by integrating entrepreneurial processes and decisions into two feedback loops based on continuous review and learning. It thereby enhances understanding of the dynamics of new business development and unfolds the early stage ventures entrepreneurs' business exits.Research limitations/implicationsThe findings are based on a small purposive sample. However, the main implication for research and theory is showing how the entrepreneurial capitals are dynamic and influenced by entrepreneurs' environment, and also separating entrepreneurs' personal issues from their business issues.Practical implicationsThe findings challenge some assumptions of policymakers and offer new insights for practitioners and early stage entrepreneurs. These include having more realistic case-studies of the entrepreneurial journey, recognizing the need to be agile and tenacious to cope with challenges, understanding how capitals can interact in complementary ways and that entrepreneurial processes can be used to leverage them at appropriate stages of the start-ups.Originality/valueThe concurrent longitudinal analysis and theory-building complements extant cross-sectional studies by identifying and analysing the detailed processes of actual business start-ups and exits. The proposed framework thereby adds coherence to earlier studies and helps to explain early stage entrepreneurial development, transformation of capitals and business exit.

Achieving and Sustaining New Knowledge Development in High-Expectation Start-ups

2010 ◽  
Vol 24 (1) ◽  
pp. 47-53
Author(s):  
Diego Matricano
Keyword(s):  
Competitive Advantage ◽  
Early Stage ◽  
High Growth ◽  
Knowledge Development ◽  
High Expectation ◽  
Knowledge Based ◽  
Start Up ◽  
New Knowledge ◽  
Start Ups

In markets characterized by strong competition, new knowledge and new knowledge development are generally recognized as the key means for an enterprise to gain competitive advantage. This knowledge-based competitive advantage is critical for all commercial ventures, but is especially so for high-expectation start-ups (technology-based ventures anticipating high growth rates). Even though the organizational processes of a start-up are still under development, the success of new knowledge development is affected by three critical factors – the structure of the enterprise, the organizational technology and the knowledge promoters. An analysis of these factors suggests that the role of the knowledge promoter is the key determinant of knowledge development success in the case of early-stage high-expectation start-ups.

scholarly journals Venture Capital and Valuation of Innovative Start-ups: the Business Case of Mosaicoon

2020 ◽  
Vol 9 (2) ◽  
pp. 01-15
Author(s):  
Antonio Del Pozzo ◽  
◽  
Salvatore Loprevite ◽  
Domenico Nicolò ◽  
◽  
...  
Keyword(s):  
Venture Capital ◽  
Performance Indicators ◽  
Early Stage ◽  
Business Case ◽  
Cash Flows ◽  
Venture Capitalists ◽  
Expected Return ◽  
Continuous Growth ◽  
Start Up ◽  
Start Ups

This article analyzes the decline of one of the best well-known and promising European start-ups: Mosaic on L. t. d. The business case is emblematic of many bankruptcies caused by strategies focusing on the expectations of continuous growth of economic capital and based on unconventional performance indicators, without considering the economic-financial results and self-financing. The expectations of return on capital are extremely high and this forces one to undertake risky growth paths with very high expected return rates. This also happens in the absence of an advanced and effective capital market. Venture capitalists, even when they are public, cannot compensate for these excesses. The analysis of the case contributes to the debate on the complex topic of assessing the potentiality of start-ups and it provides useful suggestions to operators (venture capitalists, business angels, start uppers, investors, etc.) for greater prudence in considering the non-financial performance indicators. Start-ups do not produce economic results in the early stage, so they may also be valued by using non-financial metrics. However, unconventional indicators cannot be the only parameters for evaluating. When the firm is a start-up without meaningful financial information, it is more appropriate to refer to a reliable business plan drawn up on rigorous estimates of expected incomes and cash flows. Keywords: Venture capital, Start-up, Default, Performance indicators, Business case.

What does a start-up need to grow? An empirical approach for Italian innovative start-ups

2019 ◽  
Vol 25 (2) ◽  
pp. 376-393 ◽  
Author(s):  
Niccolò Innocenti ◽  
Vincenzo Zampi
Keyword(s):  
Early Stage ◽  
Empirical Approach ◽  
Strategic Choices ◽  
Content Type ◽  
Public Investments ◽  
Start Up ◽  
Italian Provinces ◽  
Start Ups ◽  
D Investment ◽  
External Characteristics

PurposeThe purpose of this paper is to capture the role of internal and external characteristics in favouring the growth of innovative start-ups at an early stage of their life.Design/methodology/approachThe empirical approach of this paper is based on an econometric analysis applied to all Italian innovative start-ups with four and five years of life. Growth is analysed after four and five years from the constitution, depending on internal investments in research and development (R&D), in tangible assets and on characteristics external to the firm (110 Italian provinces) related to industrial variety, specialisation, public investments in R&D, etc.FindingsThe results achieved in this study reveal the importance of internal R&D investment even though there is missing evidence on the relevance of general and government specific R&D investment in the area. Other interesting results concern the importance of the firm’s involvement in the technological specialisation of the area and the need for general variety in technological diversification in the area to favour the growth of start-ups.Practical implicationsThe results imply that entrepreneurs should evaluate carefully their strategic choices in terms of the location of the start-up and the investment in R&D as these could be important factors for the firm’s growth.Originality/valueThis paper is an original attempt to measure the importance of both internal and external characteristics for the growth of start-ups. Moreover, the analysis covers the overall population of a new interesting category of firm, the innovative start-up.

Entrepreneurial cognition and premature scaling of startups: a qualitative analysis of determinants of start-up failures

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
George C. Joseph ◽  
Nimitha Aboobaker ◽  
Zakkariya K.A.
Keyword(s):  
Decision Making ◽  
Cognitive Biases ◽  
Early Stage ◽  
Self Regulation ◽  
Behavioral Patterns ◽  
Content Type ◽  
Attitude Theory ◽  
Start Up ◽  
Entrepreneurial Cognition ◽  
Start Ups

Purpose This study aims to explore the behavioral patterns of entrepreneurs, their cognitive styles and personality characteristics that can lead to a self-destructive chain of events during the transition from a fledgling business to one capable of long-term, profitable growth. This study adopts the self-regulation attitude theory to uncover the reasons for premature start-up scaling, which will help founders to study on their cognitive biases, emotions and behaviors and make efforts to do what does not come naturally to them. Design/methodology/approach The respondents for this qualitative study were selected from a group of entrepreneurs with extensive experience with technology start-ups that have either failed or succeeded during their development stages. In-depth semi-structured interviews were conducted with eight participants, who were selected through snowball sampling, on the theme of understanding “How do premature scaling mistakes happen?”. Thematic analysis was used to unearth common themes. Findings The results of this study identified the following themes, “comparison,” “emotional over-reaction,” “impatience,” “mistaken customer priorities,” “overestimation” and “overconfidence,” which eventually leads to premature scaling. The underlying decision-making heuristics of entrepreneurs can be identified as engulfed in different cognitive biases and emotions resulting in negative behavioral patterns, as in the case of premature scaling. Of the six themes, “comparison,” “mistaken customer priorities,” “overestimation” and “overconfidence relates to cognitive bias” and “emotional over-reaction” and “impatience” relate to emotional factors. Research limitations/implications The study was made possible with the support of the voluntary participants chosen by purposive and snowballing data sampling. The interviewee and interviewer biases could have also crept in as part of this qualitative approach. The study pertains only to start-ups in the information technology sector and further studies need to be done to generalize the results across industries as well. Practical implications This early-stage underestimation of unexpected obstacles in the entrepreneurship journey necessitates a focus on the entrepreneur too, as much as the concept. In these hectic and fast-paced circumstances, aspiring entrepreneurs must be taught how to deal objectively with themselves and others, as well as think strategically. Leaders who scale do so because they take purposeful measures to overcome their weaknesses through self-discipline, soliciting advice from others and using their right to change their attitude and points of view. Originality/value The study frames the new approach into the entrepreneurial literature, linking it to self-regulation attitude theory and adds to the nascent literature on neuroentrepreneurship which discuss entrepreneurial cognition, decision-making, and entrepreneurial behavior. This study attempted to explore the reasons behind the premature scaling of startups on an individual level. This study is pioneering in exploring the cognitive factors underlying an entrepreneur’s decision that results in premature scaling. This study provides insights for academicians, entrepreneurs and policymakers and helps understand the cognitive journey that leads to premature scaling.

Israel’s high-tech industry may plateau

2018 ◽  
Keyword(s):  
High Tech ◽  
Tax Revenue ◽  
Private Capital ◽  
High Tech Industry ◽  
Content Type ◽  
Technology Sector ◽  
Start Up ◽  
Skilled Personnel ◽  
Investment Capital ◽  
Start Ups

Significance This was on top of a record 3.2 billion dollars of new investment capital raised by such companies in the first half of the year. Start-up fundraising, a key metric of tech-industry health, has been growing steadily since 2012. However, that growth in part reflects worldwide trends toward higher valuations for tech companies; a growing preference by start-ups to delay public listings by funding growth through private capital and other investors (as well as traditional venture capital funds); and Israeli strengths in such growing sectors as cybersecurity, artificial intelligence and automobile-related technology. Impacts An industry contraction could help alleviate a shortage of skilled personnel, although a severe downturn would risk ‘brain drain’. Low technology-sector growth would deprive Israel of an important source of high-paid employment. Foreign investment, export earnings and tax revenue would all be harmed by an industry slowdown. Developing technology relations with emerging Asian powers could be weakened if the industry fails to grow and maintain innovation.

Causal recipes for high performance

2014 ◽  
Vol 20 (6) ◽  
pp. 542-561 ◽  
Author(s):  
Krishna Chandra Balodi ◽  
Jaideep Prabhu
Keyword(s):  
High Performance ◽  
Qualitative Comparative Analysis ◽  
High Growth ◽  
High Tech ◽  
Content Type ◽  
Competitive Industry ◽  
Leadership Strategy ◽  
Internal Integration ◽  
Start Ups ◽  
Analyze Data

Purpose – The purpose of this paper is to explore and compare causal recipes for high performance among young Indian and UK firms in high-tech industries. Design/methodology/approach – The traditional configuration approach suggests using the leadership, strategy, structure, and environment domains to identify configurations. In response to calls to improve causal linkages, and drawing on work on start-ups’ configurations, entrepreneurial orientation is used with these four domains to identify configurations. Fuzzy-set qualitative comparative analysis is used to analyze data collected via questionnaires from 70 Indian and 21 UK young firms. Findings – In all five configurations identified in UK context, firms adopt high external integration, and employ inorganic development strategies, exhibit high internal integration, or do not operate in a highly competitive industry. These firms carve out niches, enjoy strong linkages with supply chain partners, and have strong enough reputations that their environment is not highly competitive. Although employees are told what to do, autonomy is provided on how to do it. Among the nine Indian configurations, a large number of managers with high-growth experience is absent in eight, high internal integration is lacking in six, and high external integration is missing in five. These firms employ alternative recipes for success, as discussed in the paper. Originality/value – Comparing configurations in the Indian and UK contexts, the paper highlights similarities and differences across configurations, and that founders devise alternate pathways to achieve high performance. It also notes changes in relationships among variables across configurations.

Sign in / Sign up

Export Citation Format

Share Document