Entrepreneurial Finance Research Articles

Entrepreneurial finance and institutional logics in an emerging economy

Entrepreneurs raise money from multiple funding sources over time; however, studies of entrepreneurial finance typically focus on a dyadic view based on Global North institutional scaffolds. Taking a contextualised approach that understands funding as situated in local conditions, this research explores the influence of an emerging economy context on a financing process that incorporates multiple sources. Based on analysis of 36 interviews with entrepreneurs and financiers in Thailand, the research offers a model that identifies emerging entrepreneur–financier relationships and strategies for navigating multiple logics. Accessing funding involves a process of deal-making that requires multiple foci of attention over time. This article advances institutional theory by reclassifying how entrepreneurs interact with heterogeneous resource holders. Divergent logical pathways of relational formation are found among various types of financiers, suggesting an underlying institutional logic is not universal. Instead, it depends on the habitual organising principles of the focal actors and strategies adopted to manage the requirements of multiple funders.

Analysis of Formal and Informal Sources of Entrepreneurial Financing on the Performance of MSMEs in Lagos, Nigeria

Analysis of Formal and Informal Sources of Entrepreneurial Financing on the Performance of MSMEs in Lagos, Nigeria

Mastering the Field: A Critical Analysis of 'Entrepreneurial Finance' by Leach and Melicher

About The Book Book Name: Entrepreneurial Finance, 7th Edition, 2020 Authors Name: J. Chris Leach, and Ronald W. Melicher, Publisher: Cengage Learning Publishing, Identifiers: ISBN 0357130731, 9780357130735 About The Authors J. Chris Leach is a distinguished academic and Professor at the Leeds School of Business, University of Colorado at Boulder. He is known for his exceptional teaching abilities, entrepreneurial background, and research in finance. Leach has received awards for teaching and has played an active role in startups since the 1970s. He is also a faculty advisor and mentor for the Deming Center Venture Fund. Ronald W. Melicher is a distinguished Professor of Finance at the same university. He is celebrated for his teaching abilities and has held key positions in the Finance Division. Ronald's expertise spans various finance topics and has taught at prestigious institutions globally. He is also recognized as an expert in financial management and firm valuation, offering consultancy services and conducting research in critical areas of finance.

Entrepreneurial Finance and Performance of Small and Medium Sized Enterprises in Kiambu County, Kenya

Entrepreneurial Finance and Performance of Small and Medium Sized Enterprises in Kiambu County, Kenya

Exploring Small and Medium Enterprises Access to Finance: A Bibliometric Analysis

This study conducts a bibliometric investigation into the access of small and medium enterprises (SMEs) to finance. Access to finance significantly impacts SME success and growth, yet understanding this intricate matter still needs to be completed. Bibliometric analysis aims to uncover significant trends, research gaps, and influential contributors. The methodology involves extensively searching and assessing scholarly articles, journals, and publications related to SMEs' finance access. A systematic approach identifies relevant studies, extracts bibliographic data, and analyzes citation patterns, co-authorship networks, and thematic clusters. This detailed process maps the research landscape's structure, showcasing trends and new research areas. Results of the bibliometric analysis provide vital insights dominant themes like alternative financing methods, government policies, financial inclusion initiatives, and entrepreneurial finance. Influential authors, institutions, and journals contributing to SMEs' finance access knowledge are also identified. This research offers a comprehensive understanding of existing knowledge and addresses critical research gaps. Analyzing scholarly literature provides valuable insights for researchers, policymakers, and practitioners. Identified gaps and emerging areas guide future research, shaping agendas and prompting further investigations. Furthermore, the bibliometric analysis encourages interdisciplinary collaboration and knowledge exchange among scholars and practitioners. Identifying key authors and institutions supports collaborations and knowledge sharing. Ultimately, this research aims to aid evidence-based decision-making and policy formulation for improved SME finance access. By understanding the research's current state, identifying gaps, and noting emerging trends, this study strives to enhance SME growth and development by fostering a better understanding of finance access challenges and possibilities.

Entrepreneurial financing: how global and regional export intentions affect financial and non-financial choices for small and midsized enterprises in low-income countries

PurposeThe study explores how the intention to export affects financing and non-financing variables for small and medium-sized enterprises (SMEs) in a low-income country (LIC). The objectives of this study are (1) to discern between regional and global exporting and (2) to evaluate its policymaking implications.Design/methodology/approachPrimary survey data were collected from 330 Rwandan SMEs and were analysed using ordered logistic models as an application of the expectation-maximisation iterating algorithm, which was tested for robustness using a sampling model variation.FindingsThe results show that alternative sources of finance are the predominant choice to finance the intention to export within and outside Africa. As the scope of export intentions broadened from regional to global, there was a shift in preferences from less formal to more formal lending technologies, moving from methods like factoring to lines of credit. Moreover, reliance on bank officers became more significant, with increasing marginal effects. Finally, the study determined that government financing schemes were not relevant for SMEs pursuing either regional or global exporting.Practical implicationsWhilst alternative sources of finance predominate the export intentions of Rwandan SMEs, establishing a robust banking relationship becomes crucial for global exporting. Despite this implication, the intention to export should prompt more transparent communication regarding government financial support programmes. There is an opportunity for increased usage of relationship lending to customise support for SMEs involved in exporting, benefiting both the private and public sectors.Originality/valueThis study accentuates how export distance alters SME financing priorities. The results also contribute to understanding how the value of relationship lending changes when less familiar markets (i.e. global exporting) are the objective. Moreover, the study offers a new perspective on how institutional voids affect entrepreneurial financing decisions in LICs.

Corporate governance mishap in a startup: a case of GoMechanic

Learning outcomes The case study is designed to help students understand how the “growth at all costs” attitude can lead to compromised corporate governance in a start-up leading to disastrous implications for all the stakeholders. This case study aims to make students understand the components of the fraud triangle, the impact of financial fraud on various stakeholders, the role of venture capitalist (VC) investors and the importance of good corporate governance in start-ups. The case study presents an excellent opportunity for students to discuss the consequences of ignoring good governance in the pursuit of growth in a start-up. After analyzing the case study, the students shall be able to explain the concept of the fraud triangle and to be able to identify the motivation, opportunity and rationalization of financial irregularities in a start-up; analyze the impact of financial irregularities on various stakeholders; comprehend the business model of VCs and evaluate its influence on VC-funded start-ups; and appraise the importance of good corporate governance in start-ups. Case overview/synopsis The case study revolves around the confession of financial irregularities made by one of the cofounders of GoMechanic, a start-up headquartered in Gurugram, India. On January 18, 2023, Amit Bhasin confessed to financial irregularities in the company’s financial statements, leading to laying off 70% of the workforce of the company. GoMechanic had earlier raised close to US$62m [1] from maverick global investors including Sequoia Capital, Tiger Global, Orios Venture Partners and Chiratae Ventures, and was negotiating to raise Series D financing from the Japanese multinational SoftBank with aspirations to be a unicorn (start-up with a valuation of over $1bn). The confession led to a debate about the consequences of the “growth at all cost” culture being followed by start-ups as well as VCs. GoMechanic was not an isolated instance of a lack of governance in the start-ups. The confession had consequences not only for the GoMechanic but for the entire start-up ecosystem of India, which was the third largest in the world. Bhasin stated that the founders take full responsibility for the situation, and they were working on a plan which was most viable under the circumstances. However, it was not going to be easy to regain the confidence of the investors. Complexity academic level The case study is best suited for senior undergraduate- and graduate-level business school students and in executive education programs in courses such as corporate governance and ethics, private equity and entrepreneurial finance. Supplementary material Teaching notes are available for educators only. Subject code CSS 1: Accounting and finance

The Zomato dilemma: a realistic growth trajectory and share price fair valuation?

Learning outcomes This case study is related to start-up post-listing investment analysis. Through this case study, students will be able to perform the business analysis guided by the Venture Evaluation Metric tool, perform financial analysis using the discounted cash flow methods and perform investment analysis recommendation with justifications from the business and financial analysis performed above. Case overview/synopsis This case study sets out the study of a scalable start-up, Zomato, which is a successfully listed start-up firm in India. Despite the start-up development success in the pre-listing, the firm has exhibited a continuous unprofitable finance performance in the post-listing and has further experienced a volatile share price performance, both of which have puzzled existing and potential investors. In addition, some analysts are in the opinions that the firm share price valuation have been inflated with overvaluation since in the initial public offering stage and remain traded with overvaluation in the market. Notably, considering the negative indicators mentioned above, investors are concerned about long-term sustainability of the firm business and financial performance. In the context of post-listing investment, the following questions are material to investors: What is the realistic growth trajectory for Zomato in the medium term? What is Zomato’s share fair value in the medium term? Can one see opportunities or risks ahead of investing in Zomato’s shares? What will be the investment strategy for new investors? Complexity academic level This case study is suited to bachelor’s and master’s level in business schools studying entrepreneurial finance analysis. Supplementary material Teaching notes are available for educators only. Subject code CSS 1: Accounting and finance.

What Determines Global Flows of Entrepreneurial Finance?

Economists examine foreign direct investment, which mostly constitutes flows to established firms (sometimes characterized as “multinational corporations”) that might or might not engage in truly innovative activity in the FDI target country. Conversely, finance scholars have studied the pipeline of entrepreneurial finance from limited partnerships (LPs) to venture capitalists (VCs) or private equity general partners (GPs) to portfolio firms. Few studies examine relationships between general and limited partners, and those that do often examine only the United States, or a limited number of countries in a given region. This paper uses a novel dataset (LP Source) to examine secular trends in cross-national flows from the LP to the GP (in the form of various investment funds) to the portfolio firm. We find evidence for “home bias” and demonstrate that cross-border flows are affected by GDP per capita, export orientation, and country-level measures of the entrepreneurial environment.

Entrepreneurial finance in Europe and the Russian war against Ukraine

AbstractPrior research has investigated how the prices of stocks and commodities as well as inflation levels have been affected by the Russian war against Ukraine. So far, however, we know little about the impacts of the war on the entrepreneurial finance sector. Prior research on the effects of unexpected exogenous crisis events on entrepreneurial finance suggests a strong negative impact on new and follow-on funding for entrepreneurial ventures. Our study regards the Russian war against Ukraine as an unexpected exogenous crisis event and explores its impact on the entrepreneurial finance sector. It goes beyond a mere sentiment and impact analysis and also explores the underlying reasons and mechanisms as well as potential response and coping strategies employed by entrepreneurial finance investors. Based on two surveys of European venture capital (VC) and private equity (PE) investors, we find that the war had a strong negative impact on the two types of investors and their respective funds. Both VC and PE investors report more risk-aversion of limited partners (LPs) and LPs leaving the market as important challenges resulting in an overall lower willingness of LPs to invest. This applies in particular to banks, insurance funds, and pension funds. On the portfolio firm level, securing equity financing and maintaining liquidity were considered pressing issues. Overall, the situation seems to be more difficult for portfolio companies of VC as compared to PE investors. For the former, the financing- and liquidity-related issues seem to be more existential and survival-threatening. Responding to these challenges, both VC and PE investors altered their industry focus and put more emphasis on entrepreneurial experience. Financial investment selection criteria such as financial valuation, profitability, and cash- as well as revenue-generating capacity also increased in importance. Again, differences between VC and PE investors exist. Our study has implications for entrepreneurial finance theory and practice and concludes with an agenda for research on the impacts of the Russian war against Ukraine on entrepreneurial finance.

Analysis of Factors Influencing Farmers' Entrepreneurial Intentions

This paper examines the impact of perceived usefulness, perceived ease of use, perceived entertainment, and subjective norms on farmers' entrepreneurial intentions using structural equation modeling based on survey data from 126 farmers. The results of empirical analysis show that perceived usefulness, perceived ease of use, and subjective norms all present significant effects on entrepreneurial intentions, with perceived usefulness having the most significant effect, except for perceived entertainment. It is recommended that relevant departments create a favorable entrepreneurial atmosphere and supportive environment by carrying out diversified training, improving infrastructure construction, dredging up entrepreneurial financing channels, and playing the role of entrepreneurial role models. This will promote the transformation of entrepreneurial intentions to entrepreneurial behavior more effectively.

EXPLORING FINANCING PREFERENCES AMONG INNOVATIVE ENTREPRENEURS: A STUDY ON SELECTED BUSINESS FUTURISTS

Entrepreneurial financing decisions are much of the focussed area of research by many researchers in the field of finance, where the emphasis will be mainly on various sources of finance available, but at the same time understanding the purpose of the financial requirement is a major concern, because when the decision has to be made concerning the preference on the capital structure by an entrepreneur it depends on their personal preferences in terms of risk and returns. This research delves into the critical understanding of different source of finance required in different stages of development,employing a qualitative research approach, the study engaged with 9 entrepreneurs from varised age brackets, genders and sectors within Bengaluru, India.The participants attended the interview through telephonic and video conferencing to throw light on the entrepreneur’s preferences for various sources of finance. By examining the preferred financing methods of these entrepreneurs, the study seeks to uncover patterns, challenges, and opportunities unique to their ventures. The findings aim to inform both academic discussions and practical applications in the realm of entrepreneurial finance, offering valuable implications for policymakers, investors, and aspiring entrepreneursalike.

The bright side of social trust and entrepreneurial finance

A growing number of studies in the past two decades suggest that social trust matters for financing. However, a few recent studies also indicate that social trust may result in systemic biases and opportunistic behavior. First, we show that trust is important for several types of entrepreneurial financing. Second, our results reveal that trust plays an essential role in start-up financing in places with low access to information, low disclosures, and weaker legal protection. However, in countries with stronger legal protections, the effect of trust is either insignificant or negative. Hence, trust takes on the role of a substitute and may not necessarily bring benefits when strong formal institutions are present.

The role of personality traits in entrepreneurial finance

The role of personality traits in entrepreneurial finance

Analyzing the Nexus Between Entrepreneurship and Business Mathematics - A Comprehensive Study on Strategic Decision-Making, Financial Modeling, and Risk Assessment in Small and Medium Enterprises (SMEs)

This research undertakes a comprehensive exploration of the symbiotic relationship between entrepreneurship and business mathematics, focusing on strategic decision-making, financial modeling, and risk assessment within the context of Small and Medium Enterprises (SMEs). The study aims to elucidate how the integration of mathematical models influences the operational dynamics of SMEs, ultimately shaping their ability to navigate uncertainties and foster sustainable growth. The investigation delves into the theoretical underpinnings of this nexus, drawing from established theories such as the Resource-Based View, Decision Theory, Financial Modeling Theories, Prospect Theory, Systems Theory, and Entrepreneurial Learning Theories. These frameworks collectively form the basis for understanding how SMEs strategically leverage business mathematics to optimize resource allocation, assess risks, and make informed decisions. Methodologically, a mixed-methods research design is employed, combining qualitative in-depth interviews with SME entrepreneurs and quantitative surveys distributed among a representative sample. The research design aims to provide a nuanced understanding of how mathematical models are applied in SMEs, capturing both the qualitative insights of entrepreneurs and quantitative data on the prevalence and impact of business mathematics in strategic decision-making, financial modeling, and risk assessment. Challenges and opportunities associated with the integration of business mathematics are discussed, including issues of expertise, data quality, perceived complexity, and cost constraints. The research highlights the potential for technological advancements, collaborative platforms, educational initiatives, and supportive policies to bridge these gaps and unlock the transformative potential of mathematical models in SMEs. The research contributes to the growing body of knowledge on the intersection of entrepreneurship and business mathematics, providing insights for SMEs, educators, policymakers, and researchers. The findings underscore the importance of mathematical literacy in the entrepreneurial landscape, offering practical implications for enhancing decision-making processes, financial strategies, and risk management practices within SMEs. Keywords: Entrepreneurship, Business Mathematics, Financial Modeling, Risk Assessment, Small and Medium Enterprises (SMEs), Entrepreneurial Finance, Probability Analysis.

Beyond Bootstrapping a Comprehensive Analysis of Entrepreneurial Finance Strategies in the Contemporary Business Landscape

The intricate landscape of entrepreneurial finance, extending its focus beyond traditional bootstrapping methods. In an era characterized by diverse funding options, this study conducts a comprehensive analysis of the myriad strategies employed by entrepreneurs to finance their business ideas. The investigation encompasses an examination of established methods such as angel investment, venture capital, crowd funding, and traditional bank loans, as well as emerging trends in decentralized finance (DeFi) and other innovative financial models. The research adopts a multifaceted approach, considering regional variations, regulatory influences, and cultural dynamics shaping entrepreneurs' financing choices. Through extensive data collection and analysis, the study aims to discern the nuanced factors influencing the selection of specific financing avenues by entrepreneurs operating in various sectors and geographical locations. Furthermore, the research assesses the long-term implications of different financing strategies on business performance, sustainability, and growth. By exploring success factors in crowd funding campaigns, the study contributes valuable insights into the dynamics of contemporary entrepreneurial finance, shedding light on the role of marketing, pitch quality, and social engagement in funding success. In addition to quantitative analysis, the research delves into qualitative aspects, investigating psychological factors that play a role in entrepreneurial decision-making. The study aims to uncover the intricate interplay of risk tolerance, overconfidence, and decision biases in the financing choices made by entrepreneurs. As technological innovation continues to reshape the entrepreneurial landscape, this research explores the impact of emerging technologies, including blockchain and decentralized finance, on funding models. By examining the opportunities and challenges presented by these innovations, the study provides a forward-looking perspective on the evolving nature of entrepreneurial finance. "Beyond Bootstrapping" strives to offer a holistic understanding of entrepreneurial finance in the contemporary business environment, providing stakeholders, policymakers, and entrepreneurs themselves with valuable insights into the diverse strategies shaping the financial foundation of innovative ventures.

What do we know about the choices of entrepreneurs before the equity crowdfunding campaign?

AbstractThis literature survey focuses on the pre-investment phase of equity crowdfunding, encompassing three key areas: (i) a comparative analysis of equity crowdfunding (ECF) in relation to traditional sources of entrepreneurial funding, such as venture capital and business angels; (ii) a discussion on why and when entrepreneurs prefer ECF; and (iii) an in-depth examination of the diverse models of ECF platforms. This paper is relevant for both practice and research. It can help entrepreneurs to identify under what circumstances ECF might be preferable to traditional sources of start-up funding and which platform model best suits their needs. It is also relevant for research because, besides providing an organized summary of the literature on this new way of financing start-ups, it also identifies some inconsistencies and gaps in the existing literature, providing some clues for further investigations.

Starting Ingine

Research methodology The data has been provided by the protagonist in the form of interviews, tables and figures. Case overview/synopsis Abdul and his team, comprising MS Finance graduates from Lahore University of Management Sciences, embarked on a transformative process that led to the inception of their startup, Ingine. Originating from a discarded idea of importing recycling machines, the team pivoted to address a significant gap in the influencer marketing industry. They envisioned a subscription-based software-as-a-service platform that streamlines interactions between influencers and businesses, emphasizing secure payment processing, messaging and feedback features. The narrative underscores the intricate connection between influencer marketing and the return on investment for small businesses, recognizing the challenge of decoding tangible financial gains. Ingine’s mission is to unravel this puzzle, optimizing small businesses’ investments in influencer marketing while navigating the complexities of crafting a competitive influencer compensation model. The team’s background, strategic considerations and commitment to fostering sustainable relationships between influencers and businesses serve as a compelling backdrop to Ingine’s entrepreneurial aspirations. Complexity academic level The case can be used in entrepreneurship and entrepreneurial finance. The case can be used in undergrad, master’s, MBA, executive MBA and short executive programs. The complexity of a case can be increased or decreased depending on the level of class, i.e. start, middle or end of the course, and the time allocation, i.e. 90 min.

Asistensi: raising capital for innovation in health insurance, migrants and remittances

Learning outcomes After completion of this case study, students will be able to describe the funding path for start-ups, including the amounts and profiles of the usual investors or sources of funds, according to the moment in their life cycle and the characteristics of the initiative; highlight the challenges faced by start-up founders in weak entrepreneurial ecosystems and risky institutional environments; and argue in favor of or against different modes and typical instruments of venture capital (VC) investments in the early stages of new businesses, each of them different regarding dilutions, valuation potential, depth of negotiations and term sheets. Case overview/synopsis Asistensi, a technology and telemedicine start-up founded in 2020 in Venezuela by three entrepreneurs (Andrés Simón González-Silén, Luis Enrique Velásquez and Armando Baquero), raised US$3m in less than a year in a seed round in which it attracted the attention of professional VC funds such as Mountain Nazca, Alma Mundi Ventures and 468 Capital. Everything was set for launching operations in Mexico and the Dominican Republic in April 2021. However, a series of difficulties led to higher expenditure than planned, prompting the entrepreneurs to seek additional capital. The decision on the financial instrument to be associated with the potential valuation and shareholder dilution figures has been posed as a dilemma. Complexity academic level The case study focuses on understanding the start-up financing process. It can be used effectively in management- and finance-related subjects for graduate students taking introductory topics in entrepreneurship and entrepreneurial finance, as well as introductory executive education courses in entrepreneurship, entrepreneurial finance and VC. Supplementary materials Teaching notes are available for educators only. Subject code CSS3: Entrepreneurship

Teaching Private Equity in an Era of Uncertainty: Introduction to Private Equity, Venture Capital, and the Financing of Entrepreneurship: The Power of Active Investing, New York, Wiley 2023

Teaching Private Equity in an Era of Uncertainty: Introduction to Private Equity, Venture Capital, and the Financing of Entrepreneurship: The Power of Active Investing, New York, Wiley 2023