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.

scholarly journals Innovative start-ups and young entrepreneurs: Definition of venture capital and findings from Switzerland

2017 ◽  
Vol 7 (1) ◽  
pp. 75-81
Author(s):  
Simon Zaby
Keyword(s):  
Venture Capital ◽  
Success Factors ◽  
Total Sample ◽  
Venture Capitalists ◽  
Flow Of Funds ◽  
Start Up ◽  
Capital Financing ◽  
Proper Definition ◽  
Definition Of ◽  
Start Ups

This paper aims to investigate success factors of innovative start-up firms from the perspective of young start-up managers. Which key factors did they experience before and since the foundation of their company? The experience from the quite young Swiss start-up scene pro-vides important insights to entrepreneurs and policy-makers in emerging countries that cur-rently face the necessity of building up a start-up environment. One part of the data has been collected by the author, the other part originates from the Swiss Venture Capital Database (total sample size: 306). The results show a significant role of venture capital financing for the success of innovative start-ups. Interestingly, this is to some extent because the start-ups see various additional benefits from venture capitalists involved in their firm. Thus, the findings shed new light on a proper definition of venture capital that should not solely focus on the flow of funds.

scholarly journals Corporate venture capital: global trends and evaluation of russia’s prospects

2019 ◽  
Vol 5 (2) ◽  
pp. 114-128
Author(s):  
О. A. Yeremchenko
Keyword(s):  
Venture Capital ◽  
Mobile Communications ◽  
Early Stage ◽  
Corporate Venture Capital ◽  
Global Trends ◽  
Second Stage ◽  
Start Up ◽  
Corporate Venture ◽  
Total Investment ◽  
Start Ups

The article analyzes the global trends of corporate venture financing (CFE) as a whole and for individual sectors of the economy. It is shown that the industries in which KFW is most actively and dynamically used are the Internet, mobile communications and healthcare. The maximum attention of corporate venture funds is attracted by start-ups in the early stages of raising capital, more than half of all venture capital deals are made at the Seed / Angel (seed stage) and Early Stage stages (the second stage of attracting start-up capital). The most common exit from venture capital deals during 2014–2018. For most industries, the redemption share of the FAC is a management startup (Management Buyout). It was concluded that Russia is poorly included in the use of corporate venture capital as a tool for building technological capacity: the country’s share in the number of corporate venture capital transactions in 2018 is 1.9% of the global total, and the total investment of Russian enterprises estimated at only 0.45% of the global total. It was suggested that it would be expedient to increase the activity of Russian corporations in the field of creating and using the capabilities of the FSC.

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.

The Venture Capital–University Interface

2010 ◽  
Vol 24 (4) ◽  
pp. 263-268
Author(s):  
Krisztina ‘Z’ Holly
Keyword(s):  
Venture Capital ◽  
Economic History ◽  
Venture Capitalists ◽  
Major Research ◽  
The Core ◽  
Laboratory Bench ◽  
Start Up ◽  
The University ◽  
Start Ups ◽  
The Relationship

Entrepreneurial start-ups have left an indelible impression on much of the USA's recent economic history. As hotbeds for technological innovation, university research laboratories create groundbreaking innovations that have been at the heart of many successful start-ups. However, powerful ideas do not necessarily beget successful companies: great ideas must be identified, acquired and developed into successful businesses using a unique blend of skills. Venture capital funds exist to perform this valuable – and lucrative – role. Some venture capitalists scour the campuses of major research universities in search of the next big idea, but the process is not as straightforward as discovering an inventor at a laboratory bench. A range of practical, personal and legal hurdles must be cleared before an idea can begin to transform into the core of a new company. With these common hurdles in mind, interviews with 94 geographically and commercially diverse venture capitalists were conducted to achieve a better understanding of the relationship between the academic and venture capital communities: what motivates the various stakeholders, which are the most pressing problems facing university–venture capital relations and what can be done to improve the process for everyone involved? While many factors influence start-up success, five main areas emerged for universities looking to improve the university–investor interface: understanding investor motivations, supporting entrepreneurs, streamlining bureaucracy, improving access and visibility and fostering a culture of innovation on campus.

scholarly journals Exit market liquidity and venture capitalists’ investment behaviour: Evidence from Australia, Canada and the United Kingdom

2010 ◽  
Vol 8 (1) ◽  
pp. 743-757
Author(s):  
Shrimal Perera ◽  
Tabita Bertsch ◽  
Jayasinghe Wickremanayake
Keyword(s):  
United Kingdom ◽  
Venture Capital ◽  
Early Stage ◽  
Market Liquidity ◽  
Venture Capitalists ◽  
The United Kingdom ◽  
Capital Funding ◽  
Exogenous Factors ◽  
Start Ups ◽  
Investment Behaviour

This study investigates the effect of exit market liquidity on venture capitalists’ (VCs’) investment behaviour. The sample consists of 4,758 investment rounds disbursed by venture capital funds in three selected common law-based OECD countries (Australia, Canada and the United Kingdom) during 1990-2005. The results indicate that investments in early-stage projects by VCs are not related to exit market liquidity conditions after controlling for exogenous factors. Empirical results, however, show that exit market liquidity is positively associated with VCs’ investments in new projects (as opposed to follow-on projects). Put differently, new firms (including start-ups) are more likely to obtain venture capital funding during times of liquid exit market conditions. Arguably, these findings highlight the importance of ‘timing’ of new project launch

Three Views of a Train Wreck

2016 ◽  
Author(s):  
Michael Kinch
Keyword(s):  
Public Health ◽  
Research And Development ◽  
Venture Capital ◽  
Food Chain ◽  
Early Stage ◽  
Health Benefits ◽  
Federal Spending ◽  
Moore’S Law ◽  
Government Grants ◽  
Start Ups

Despite and arguably because of the enormous public health benefits arising from the introduction of new medicines, the industry is in the midst of crisis. We detail in this chapter the decline in research and development efficiency, which has been termed “Eroom's Law,” a playful inversion of the bettern known Moore's Law of Computing. An explanation of declining efficiency follows as is a brief summary of some remedies taken by many biopharmaceutical entities, including the abandonment of therapeutics targeting particularly difficult indications such as Alzheimer's disease and antibiotics. We also convey how the industry has developed into a sort of food chain, with smaller companies and government grants supporting the earliest stages of research, which are then acquired by medium-sized companies, which in turn are consolidated into large companies. This food chain is fundamentally in doubt based on shrinking Federal spending on research combined with a decline in venture capital support for early-stage start-ups.

Start-Ups and Spin-Offs in Biotechnology Sector in Poland

Biotechnology ◽  
2019 ◽  
pp. 1293-1321
Author(s):  
Anna Białek-Jaworska ◽  
Renata Gabryelczyk
Keyword(s):  
Business Models ◽  
Stock Exchange ◽  
Early Stage ◽  
Global Strategy ◽  
Third Party ◽  
Start Up ◽  
Warsaw Stock Exchange ◽  
Business Line ◽  
Definition Of ◽  
Start Ups

This chapter concerns the subject of research-developmental activity of biotech spin-offs in Poland with particular reference to their strategy, determinants of their development and determinants of their financial standing. In the chapter, the authors analyse the determinants of biotech spin-offs and start-ups development in Poland in the light of the research commercialisation cooperation on the universities-business line. The literature overview contains the definition of a process for the commercialisation of the results of research and development (R&D) activity and components of companies' business models. The chapter defines key activities in the development of business models in the context of the commercialisation process and the life cycle of the company, especially at the start up and early stage. Quality-quantitative analysis includes the business models of seven biotechnology spin-offs traded on the alternative market of the Warsaw Stock Exchange, especially the structure of their intellectual capital, R&D expenses in relation to received subsides and grants, third-party shares in start up equity, and the ability to realise the “Go Global” strategy.

Start-Ups Are Everywhere! (but the Growth Statistics)

2021 ◽  
pp. 43-50
Author(s):  
Dan Breznitz
Keyword(s):  
Venture Capital ◽  
San Diego ◽  
Gilded Age ◽  
Silicon Valley ◽  
Successful Solution ◽  
Start Up ◽  
Ways Of Thinking ◽  
Finance Innovation ◽  
The Mind ◽  
Start Ups

“But,” some readers might say, “look at Israel, look at San Diego—it is still feasible to become a Silicon-Hyphen.” To which this chapter answers: “And would it be a good idea if it is?” The chapter opens the mind of the reader to new ways of thinking about innovation and growth. Providing a frontal attack on the start-up religion and its most important commandment: using venture capital (VC) as a basis for growth. VCs have attained the paradigmatic status of a “must-have,” institution, when in fact they are just one, not very successful, solution to solving the question of how to finance innovation. The chapter does it by explaining how VCs really work and make money (and for whom), where and when they are successful (rarely and only in ICT and biotech), what does that means to the companies they finance, who is allowed to be part of this party, and what are the impacts on communities in places where the VCs are successful (inequality levels last seen in the Gilded Age). It utilizes research on Israel and Silicon Valley to drive those points home. At the end of the chapter the reader should realize that, YES, they want innovation-based growth, but NO, even if they could make it happen, the last thing they want for their community is to become a Silicon-Valley/Israel look-alike.

Venture Capital Communities

2019 ◽  
Vol 55 (2) ◽  
pp. 621-651 ◽  
Author(s):  
Amit Bubna ◽  
Sanjiv R. Das ◽  
Nagpurnanand Prabhala
Keyword(s):  
Machine Learning ◽  
Venture Capital ◽  
Computational Methods ◽  
Small Groups ◽  
Early Stage ◽  
Spatial Location ◽  
Venture Capitalists ◽  
Learning Tools ◽  
Physical Sciences

Although venture capitalists (VCs) can choose from thousands of potential syndicate partners, many co-syndicate with small groups of preferred partners. We term these groups “VC communities.” We apply computational methods from the physical sciences to 3 decades of syndication data to identify these communities. We find that communities comprise VCs that are similar in age, connectedness, and functional style but undifferentiated in spatial location. Machine-learning tools classify communities into 3 groups roughly ordered by their age and reach. Community VC financing is associated with faster maturation and greater innovation, especially for early-stage firms without an innovation history.

Does Social Similarity Pay Off? Homophily and Venture Capitalists’ Deal Valuation, Downside Risk Protection, and Financial Returns in India

2020 ◽  
Vol 31 (3) ◽  
pp. 576-603 ◽  
Author(s):  
Kim Claes ◽  
Balagopal Vissa
Keyword(s):  
Early Stage ◽  
Qualitative Interviews ◽  
Downside Risk ◽  
Venture Capitalists ◽  
Data Set ◽  
Start Up ◽  
Risk Protection ◽  
Regional Similarity ◽  
Post Hoc ◽  
The Impact

We ask how social similarity between start-up founders and venture capitalists (VCs) influences VCs’ pricing decisions and returns on investments. We conceptualize how regional and caste similarity, two salient aspects of social similarity in India, affect two distinct aspects of deal pricing: premoney valuation and investors’ downside risk protection in the Indian venture capital market. We theorize that VCs reflect the benefits and costs of social similarity by setting higher premoney valuation when investing in companies led by socially similar founders while also minimizing their downside risks in these investments. We expect that social similarity’s impact on pricing is amplified when VCs face greater subjective uncertainty, such as for early-stage deals or if the VCs lack expertise in the start-up company’s product market. Finally, we claim that VCs achieve superior returns on investments when their deal pricing accurately reflects the impact of social similarity. We tested our conceptual model using both parametric and nonparametric methods on a hand-collected data set of all deals that occurred during 2005–2012, and we supplemented our analyses with in-depth, qualitative interviews that contextualize our findings. The pattern of findings on regional similarity are consistent with our model, but the effects of caste in our data are theoretically anomalous. Post hoc analyses to resolve the anomaly suggest an “intrinsic quality” mechanism, whereby higher-caste VCs set higher valuations when matching with lower-caste founders that signal high quality. Overall, our findings offer evidence that VCs incorporate social attributes into deal pricing in nuanced yet boundedly rational ways.

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