The role of investors for early-stage companies

Abstract

Investors often contribute in many ways to the growth and profitability of early-stage companies. However, the benefit of different types of support beyond the provision of capital is largely unclear. Based on a dataset comprising information about 967 start-up companies in the Swiss market and a survey among these yielding 214 responses, this paper empirically examines the role of investors in the early-stage development of companies. We find that the provision of contacts and access to networksas well as coaching and consulting are the most important types of support provided by investors in addition to financing. Further, critical factors include the active participation of investors on the board of directors, investor input in shaping the corporate strategy and organisation, and the overall investor expertise and experience. Conversely, the provision of infrastructure is of lesser importance. Nevertheless, 15% of the entrepreneurs reported that they received no support in addition to funding.