Financing Of Entrepreneurial Ventures Research Articles

INFORMAL FINANCE IN SETTINGS OF POVERTY: ESTABLISHING AN AGENDA FOR FUTURE ENTREPRENEURSHIP RESEARCH

Entrepreneurship is viewed as a major tool in the effort to address poverty in emerging economies. Yet financing for such entrepreneurial ventures remains a major challenge. To date, most research on financing of entrepreneurial ventures among those in poverty in emerging economies has focused on formal financial tools such as microfinancing. However, a far larger financing tool employed in practice is informal financing. Such financing takes the shape of loans by family/friends/neighbors, private money lenders, or rotating savings groups. Very little is known about how these finance tools affect entrepreneurship. This article reviews the existing literature on informal finance in emerging economies and then develops a rich research agenda for scholars on informal finance in emerging economies and its role in entrepreneurship.

The role of crowdfunding in entrepreneurial ventures: an analysis of recent trends in Sweden

The financing of entrepreneurial ventures has been at the forefront of academic debate as well as policy-making discussion for almost a century. In general, there seems to be an agreement that the risks associated with business start-ups are higher than for mature firms, hence, these ventures will have to pay a higher interest rate than more mature and large firms. In this paper the authors analyze the role of a relatively new form of financing for entrepreneurial ventures – crowdfunding – and how this form of financing is similar and different from traditional sources of finance. The authors are also presenting different forms and models of crowdfunding available on the market together with illustrations from the crowdfunding industry in Sweden. The analysis indicates that the positive effects with crowdfunding are numerous but that the size of the crowdfunding sector is relatively small in comparison with the banking and venture capital industry

Organizational Decision-Making and Information: Angel Investments by Venture Capital Partners

We study information aggregation in organizational decision-making for the financing of entrepreneurial ventures. We introduce a formal model of voting where agents face costly tacit information to improve their decision quality. Equilibrium outcomes suggest a theoretical tension for group decision-making between the benefits of information aggregation and a cost from the participation of uninformed agents, and this tension presents a boundary condition for when a group decision is superior to an individual decision.We test the implications of the model for a particular phenomenon in venture capital: private angel investments by the partners outside of their employer, which represent investments passed on by the employer. Venture capital partners, acting independently with their personal funds, make investments into younger firms with less educated and younger founding teams than their employing VC firms, but these investments perform financially similarly or better on some metrics even when controlling for investment size, stage, and industry. Geographic distance and technological inexperience by the VC increase the probability the investment is taken up by a partner and not the VC. This work contributes to an emerging stream of literature on information aggregation in organizations and the established literatures on resource allocation and incumbent spin-outs.

Financing of entrepreneurial ventures: Entrepreneurship Policy and Public Start-Up Capital

This article uses institutional theory in the context of entrepreneurship policy and the financing of new firms to examine the effect of public sources of start-up capital on entrepreneurial perfor...

Introduction to the Special Issue on Economics and Strategy of Entrepreneurship

This special issue is the outgrowth of a 2007 conference, Entrepreneurship: Strategy and Structure, sponsored by the NBER Working Groups on Entrepreneurship and Innovation Policy and the Economy. The aim of the conference and special issue are to provide a forum for rigorous frontier research on the microeconomic and institutional foundations of entrepreneurship, and the strategic and market consequences of entrepreneurial activity. The papers included in the Special Issue include a subset of papers presented at the conference as well as papers submitted as the result of a solicitation for the Special Issue from the journal. As with all special issues in JEMS, all of the articles in this issue have gone through the standard editing and refereeing process that is applied to all submissions to JEMS. We would especially like to thank Dan Spulber, Josh Lerner, and Bob Strom for their help throughout the process, and the Kauffman Foundation for providing support for the original NBER conference. Although traditional research in economics has mostly ignored entrepreneurship, or otherwise equated it with a mechanism for finding market equilibrium, economists have made considerable progress more recently in understanding the economic foundations and consequences of entrepreneurial activity. Applying frontier theoretical and empirical

Financing of Entrepreneurial Ventures

Entrepreneurs with zero startup capital can launch new ventures through kind-financing from input-suppliers by offering higher input-prices at time t+k; and, through kind offering at lower prices at time t+k to output-buyers who make advance payments at time t. Interests of entrepreneurs, input-suppliers, and output-buyers get intertwined through such arrangements. All parties (entrepreneurs, input-suppliers and output-buyers) joined through kind-financing, kind-offering, and advance-payments have vested interests in the success of the new-venture (and they contribute through their expertise). This improves efficiency thereby generating a higher level of output than the one generated under cash financing and spot-selling. The value of outputs generated through kind-financing will be greater than the value of outputs owed to kind-suppliers; and, the quantity of outputs generated through advance-payments will be greater than the quantity of outputs owed to advance payers. All types of ventures (new-ventures, growing-ventures, and advanced ventures) gain through kind-financing and forward-selling.

Guest editorial: Women and the financing of entrepreneurial ventures: More pieces for the Jigsaw

This paper provides an overview of current research into the financing of women-owned/led ventures and identifies specific issues requiring further investigation, as well as possible future research directions. Topics covered by current research are divided, for discussion, into five broad categories, namely the characteristics and behaviours of women business owners; the characteristics of their ventures; financial strategies adopted and business decision-making; the relationships between those seeking finance and potential suppliers; and the impact of gender on women's ability to raise finance. In relation to future research, the authors highlight, among other things, the need for: research designs that capture the heterogeneity of women business owners and their ventures; in addition to comparative studies, investigations that give ‘voice’ to women's experiences (of seeking and supplying finance) in their own right; sound theoretical and conceptual foundations and contributions to theory building; more longitudinal studies; holism, inclusivity and heterogeneity in research into the financing of women-owned/led businesses.

Special issue: Women and the financing of entrepreneurial ventures

(2004). Special issue: Women and the financing of entrepreneurial ventures. Venture Capital: Vol. 6, No. 4, pp. 367-368.

Leveraging intellectual property in the financing of entrepreneurial ventures: a technology-based solution to the perfection of security interests

The commercialisation of innovation is a significant stimulus to economic growth, especially in the entrepreneurial sector of the economy. The supply of funds to bring to market a technically and commercially viable innovation requires an assurance to funding sources that their financial interest in the innovation is secure. This confirmation of a security interest requires both adequate legal protection of intellectual property and patents on which the innovation relies and a rapid and cost-effective search for liens on that intellectual property. The current system (or lack thereof) of lien registration differs from state to state, from manual systems to remotely searchable computer databases. It is expensive and time-consuming to mount a full 50-state search. The recommendation in this paper is that there be a state-managed input of data into a state database that is linked nationally to other state databases, all using compatible technology and protocols. To implement this recommendation, states will need to make an investment in mutually compatible electronically searchable databases. The payoff is a more timely, effective and efficient method of funding innovation based on intellectual property-based innovation, thus stimulating economic growth and job creation. While the paper has the USA as its focus, the recommendations may be extended internationally. The paper argues for the need to increase the availability of, and access to, reliable information about liens on intellectual property assets in the 50 states.

The Size of the Informal Venture Capital Market in the United Kingdom

Despite its undoubted importance to the financing of entrepreneurial ventures, there are few reliable measures of the size of the informal venture capital market. This paper reviews three methods used to generate such estimates – market-based approaches, firm-based approaches and the capture-recapture approach – and develops an alternative approach that is based on scaling up from the visible segment of this market represented by business angel networks. This methodology is applied to provide the first formal estimate of the size of the informal venture capital market in the United Kingdom. Informal venture capital investment is shown to broadly equate to the amount of institutional venture capital provided to start-up and early stage ventures. Reflecting the smaller average size of investments in the informal venture capital market, however, eight times as many businesses raise finance from business angels than from institutional venture capital funds.