Financing Round Research Articles

Founders’ Characteristics and Startups’ Funding Opportunities Around the Globe

In this paper, I investigate the eleven largest startup markets in the world to uncover whether female founders have a disadvantage in the amount of funding received by their respective startups. I am also interested in whether country-level factors such as the level of development and quality of formal and informal institutions can impact the results. Moreover, I research founders with formal technical education to show if they have any advantage while funding their startups. I investigate more than 3,500 international startups during the period of 2017-2022 while utilizing CrunchBase database. I uncover that female founders are at a disadvantage in funding for their startups in all 11 countries of interest. Such results are more pronounced in developed countries, those with better functioning formal institutions and more individualistic populations. The disparity between male and female-led startups’ funding is especially pronounced in debt financing as well as seed round of equity financing. The technical education of male and female founders does not provide any advantage in terms of the funding opportunities.

Divergent trajectories on frontier innovations: A comparison of international venture capital-invested ventures between China and the United States

How do international venture capital (IVC)-invested ventures (IIVs) between the U.S. and China generate new knowledge differently and follow distinct growth trajectories? Given that venture capital (VC) is critical for financing frontier innovations among new ventures, comparing U.S. and Chinese IIVs is essential for informing national innovation policy. Based on the organizational ecology perspective, we propose that U.S. and Chinese new ventures have divergent trajectories in frontier innovations. We identify 1782 first-round IVC investments in U.S. and Chinese new ventures operating in the computer software, e-commerce, biotechnology, semiconductors, and artificial intelligence sectors between 2010 and 2020 along with their 2825 patents (317 Chinese patents and 2508 U.S. patents). Our findings indicate that Chinese IIVs exhibit greater variation in terms of technological distance, search scope, and knowledge coupling, compared to U.S. IIVs. However, Chinese IIVs’ frontier innovations have more divergent technological trajectories and attract fewer followers than U.S. IIVs, based on patent citations. In a firm-level analysis, we find that Chinese IIVs are less likely to receive a subsequent financing round. Further, IIVs with greater technological distance and search scope, and with higher impact patents, have more opportunities to receive the next round of funding.

A configurative analysis investigating how new technology-based firms gain the first financing round

AbstractNew technology-based firms (NTBFs) present high levels of information asymmetry since knowledge base, the intangibility of assets, and appropriability issues are particularly pronounced. Investors experiment with difficulties in evaluating the quality of NTBFs and look into insights representing the venture's promises and outlooks, and NTBFs need to face limited financing opportunities. Therefore, information asymmetries and moral hazards may influence the financing system of NTBFs. Based on the signaling theory, we propose a configurative approach built on five accessible signals (founders’ education and work experiences, property rights, alliances, and size) to identify combinations of signals conducive to the NTBF reaching a first financial round. By adopting a configurative approach through the qualitative comparative analysis, we advance our understanding of the intricate dynamics between NTBFs and investors, shedding light on the complexity and interplay of various factors influencing the financing outcomes.

Technology-oriented start-ups and valuation: A novel approach based on specific contract terms

New technology-oriented ventures contribute disproportionately to the creation of innovative products, and are the main drivers of the transformation of entrepreneurship, and therefore, to local and national economies. Financial theory has traditionally emphasised the economic importance of access to external resources for fostering a start-up ecosystem; however, little attention has been paid to finding fair value for technology ventures. This is a challenging issue, as their growth is rather non-linear and has a capital structure complex because of various fundraising rounds with different classes of shares, which differ in terms of their rights, and thus, the degree of investor protection. We address this problem by proposing a novel start-up valuation model based on liquidation preferences. The main idea behind this model is that the issue of any preferred equity within a follow-up financing round is used as an opportunity to value common shares, and thus, the value of the wealth of its shareholders. After implementing the model on specific contract terms in a case study, our approach provides decision makers with significantly more accurate results than those achieved by post-money valuation, which is a widespread practice in the venture capital industry. Our model contributes to the redefinition of established valuation models, provides guidance to founders, investors, and managers, and supports better decision-making regarding the allocation of scarce resources in technology-oriented industries.

Industrial-robot firm raises $50 million

The Swiss firm ANYbotics has raised $50 million in a series B financing round that had participation from Aramco Ventures and other investors. ANYbotics makes robots for inspecting oil and gas, chemical, and other industrial facilities. The company says that BASF, Petronas, Shell, and Vale are already using its robots and that it has another $150 million in orders for its systems.

The Impact of Riders on the Valuation of "Unicorn" Companies

With the development of the times, industry terms such as big data and artificial intelligence have become familiar, and with them the emergence of "unicorn" companies have also been given the opportunity to develop and the corresponding challenges, while the proliferation of "unicorn" companies has brought about a rigorous the proliferation of 'unicorn' companies brings with it the issue of rigorous valuation. In reports on unicorn companies published by major research institutions, Ant Group has led the way for the last five years, jumping from a valuation of US$75 billion to US$150 billion, making it a super unicorn. Whether its value actually matches its valuation, and which factors play a key role in this, and how, needs to be further explored: this paper takes Ant Group as the subject of this study, starting with a brief overview of 'unicorn' companies and Ant Group companies, and then introducing traditional valuation methods --The paper also examines the different types of riders in different financing rounds in the financing process of Unicorn companies, and finally analyses the impact mechanism and optimization of different riders on the valuation of Unicorn companies.

The Wealth Anxiety of Chinese Generation Z Women Brought by the Wealth-showing Videos on Chinese E-commerce Platform RED

As an e-commerce platform in mainland China, RED was established in June 2013 in shanghai. RED has a total of 6 rounds of financing, with a valuation of more than 20 billion US dollars (about 126.7 billion yuan). More than 200 million monthly active users in 2022, most of its users are women. Money anxiety is a problem for young women today. Through the research on the influence of RED's wealth-showing videos on the money anxiety of young women, people will pay more attention to the money anxiety problems that young women are facing, and problems and improvements needed in the operation of RED as an e-commerce platform. This study investigated young Chinese girls' perceptions of RED's wealth-showing videos and their level of money anxiety by creating and sending questionnaires. A total of 300 questionnaires were issued and 70 valid questionnaires were returned. REDs wealth-showing videos aggravated the money anxiety of most young women, and caused impulsive consumption and excessive consumption of young women, causing physical and psychological harm to young women, as well as adverse effects on society. In response to these problems, platforms should rectify the authenticity of videos, avoid the spread of malicious videos showing off their wealth, and at the same time call on bloggers to share content that is conducive to establishing a correct view of money among young women.

Договор SAFE как альтернатива договору конвертируемого займа: опыт зарубежных стран

In 2013, the leading American accelerator Y Combinator introduced the new financing instrument modified to standardize and simplify investments in startups in seed financing rounds. The target of the instrument is based on its name SAFE — Simple Agreement for Future Equity. Nowadays SAFE has conquered the world of venture investments not only in the United States of America but in many jurisdictions such as in Austria, Germany, Italy, Norway, Sweden, and the United Kingdom. It has been amended and become a foundation for the large number of modified alternatives.

A SYSTEMATIC LITERATURE REVIEW OF THE ADOPTION OF A BLUE OCEAN STRATEGY BY SMALL AND MEDIUM ENTERPRISES FOR SUSTAINABLE GROWTH

Market dynamics are shifting abruptly as businesses integrate technology and other macroeconomic factors. Even as market ground breakers, an enterprise must invest massive amounts of funds to sustain its competitive edge. Though endless rounds of financing is not a viable option to staying competitive, many enterprises have adopted this management style. A Blue Ocean Strategy is a road map that enables businesses to create or venture into new uncontested market spaces and demand while pursuing product differentiation while keeping costs down. Instead of beating the competition, it reduces the competition or makes it irrelevant. This paper presents a systematic literature review of the Blue Ocean Strategy (BOS) on small-and-medium enterprises. The objective of the study is to provide an overview of the Blue Ocean Strategy and its impact on the sustainable growth and performance of small-and-medium-sized enterprises. The study includes an in-depth analysis of what happens when a company adopts the Blue Ocean Strategy (BOS) and its effect on internal development, overcoming hurdles and achieving sustainable growth, including the findings of this research paper, the implications of those findings and a conclusion. The results found that the Blue Ocean Strategy (BOS) positively affects performance and growth on small and medium enterprises. This study is effective for deciding on the adoption of the Blue Ocean Strategy within an organisation.

Microalgae oil firm Checkerspot raises cash

Checkerspot, one of C&EN’s 10 Start-Ups to Watch in 2018, has raised $55 million in a series C financing round led by ArrowMark Partners and supported by Cox Enterprises. The company, which is headquartered in California, derives polyols from microalgae- based oils. These polyols are made into polyurethanes used in its WNDR Alpine line of skis and snowboards.

Round duration and equity injection in venture capital. An empirical analysis in the medtech sector

ABSTRACT The pandemic has brought extraordinary attention (and therefore funds) to the medical technology (medtech) sector. The urgent need for innovation in this industry is widely acknowledged; thus, venture capitalists (VCs) are playing a major role in supporting its renovation. The present research aims to identify how venture capitalists approach medtech companies, which are typically perceived as considerably risky. Specifically, the objective is to highlight the features of the control mechanisms employed by VCs when financing firms operating in the health care industry, with explicit focus on the staged structure of the investment. Previous studies have supported the hypothesis of shorter financing rounds with higher required equity stakes when a VC firm approaches a hazardous investment. To test the consistency of such evidence with the case of medtech firms, two sets of regressions on a unique dataset have been performed. The results reported show partial suitability of the expectations to the specific case.

The dark side of signals: Patents protecting radical inventions and venture capital investments

Patents are an important signal of the unobserved quality of young, innovative firms. We study patents that protect radical inventions associated with high earnings potential but also a high risk of failure. These previously disregarded signals convey positive and negative information simultaneously, i.e., strong signals that have a dark side. We argue that whether firms that send such signals are attractive investment targets for venture capital (VC) investors depends on the characteristics of the investors. Reputable VC investors are attracted to the strong quality signals of patents protecting radical inventions and are better able than other VC investors to deal with the dark side of these signals through syndication. These effects are stronger in the first financing round than in follow-on rounds, as the (positive and negative) informational value of patents protecting radical inventions diminishes over time as information asymmetries between young firms and prospective VC investors are reduced. We test these predictions using a sample of 759 young life science firms and 555 VC investors. Econometric estimates from a matching model support our predictions.

Review: Meat the Future, by Liz Marshall

Review: <i>Meat the Future</i>, by Liz Marshall

Optimizing Investment Period Length and Strategies for Private Equity Portfolios with Rounds of Financing

Optimizing Investment Period Length and Strategies for Private Equity Portfolios with Rounds of Financing

Who Finances the Ventures That Are Successful? Evidence From 84,000 Financing Rounds

Who Finances the Ventures That Are Successful? Evidence From 84,000 Financing Rounds

Early-stage venture financing

This paper develops a theory of venture financing at the earliest stages. Ventures choose between issuing equity or a “SAFE”, which gives investors the right to a number of shares to be determined by a future equity price. Our key assumption is that between two rounds of financing the market learns information that is initially private to the entrepreneur. Higher quality types prefer a SAFE over equity for the first round of financing because under the SAFE they know that their types will be revealed to the market before the determination of the number of shares they must provide to investors. Offsetting this benefit of SAFEs is a moral-hazard (debt-overhang) cost. We find initial support for the theory in a data set of 500 financing rounds.

Start-up raises funds for cell-based meat

The start-up Prolific Machines has raised $42 million to develop a cell-based meat manufacturing platform that it describes as an assembly line for biology. The company hopes to bring down the cost of cell-based meat by avoiding recombinant growth factor proteins, an expensive ingredient. Breakthrough Energy Ventures led the series A financing round, which included basketball stars, an NFL quarterback, and a celebrity chef. Prolific Machines is building a 2,300 m 2 headquarters in California.

Merck bets $250 million on circular RNA

Merck & Co. has entered a collaboration with circular RNA company Orna Therapeutics to develop several programs, including vaccines and therapeutics for infectious diseases and oncology. Merck will pay Orna $150 million up front and invest $100 million of equity in Orna’s series B financing round, which initially closed Aug. 16 with $221 million. Orna could receive up to $3.5 billion in milestone payments. The company’s technology stems from research done at the Massachusetts Institute of Technology by cofounder Alex Wesselhoeft and molecular geneticist Daniel G. Anderson, who is on Orna’s board of directors. To make circular RNA, which the firm has dubbed oRNA, Orna brings together the two ends of a strand of linear messenger RNA (mRNA). Because the loose ends can be targeted by RNA-degrading enzymes, RNA circles are stabler in the body than linear strands, CEO Tom Barnes says. That greater stability helps the circles produce more

Venture Capital Financing in Europe: Gender and Ethnic Diversity in Founder Teams

Recent research has shown that an embarrassingly small proportion of entrepreneurs who obtain venture capital (VC) funding in the United States are females or members of ethnic minorities. Although access to venture funding by gender and ethnic origin has been well documented in the United States, much less information is available about the situation in Europe. The authors address the financing of gender and ethnically diverse startup teams in Europe and examine the relationship between founder team diversity, VC funding, and startup performance at venture-financed businesses. They use data on all recorded European venture deals over the period 2010 to 2020 for startups that have raised more than USD 1 million including all rounds and financiers, augmented by identifying founders by gender and ethnicity. For these startups, gender diversity on the founding team is not associated with raising VC funding in their first round of financing, while ethnic diversity plays an important role in both the amount of VC funding raised and venture performance in certain sectors and countries. A carefully designed investment strategy that builds on a preference for diverse founding teams in some sectors may therefore provide favorable returns.

(Invited) Commercialization of an Electrochemical Filter – ElectraMetTM

ElectraMetTM is on a mission to apply advanced carbon electrode technologies to deliver targeted solutions for sustainable water treatment while delivering superior performance and reliability to its customers. We are a venture-funded start-up based in Lexington, Kentucky from core technology developed at the University of Kentucky. Founded in 2014 after winning a local pitch competition, we have grown to more than 20 employees with a standalone manufacturing facility, which is a contrast from our start in a small lab-space at the University of Kentucky’s Advanced Science & Technology Commercialization Center (ASTeCC) incubator. Much of our success is owed to federal SBIR awards, state matching grants, and the Bluegrass Angels, without which, we would not have realized the growth we are at today. This summer, we closed a $6MM Series B financing round, led by HG Ventures, to meet the rising demand for sustainable industrial water treatment, accelerate corporate partnerships, and expand operations.Over the past 7 years, we have commercialized two product offerings, INCION® and ElectraMetTM, both based on patented carbon electrode technology. INCION® is an electrochemical device for water softening that employs the principles of inverted capacitive deionization (i-CDI), removing calcium and magnesium from water streams without the use of membranes, thus eliminating issues associated with scaling.1 , 2 ElectraMetTM is an electrochemical filter for targeted metals removal, with an initial focus on lead, chromium, and copper.3 Industrial applications range from electroplating to semiconductor manufacturing to mining. Figure 1 depicts the progression of our device design over time and Figure 2 shows representative data for copper removal from wastewater at an electroplating facility for over 1000 gallons treated.The path to commercialization has not been without its challenges, both technical and business facing. When it comes to scaling up any technology, there is a lot of work involved, and the process is not trivial. This is especially true for electrochemical systems, whose behavior is often dramatically affected by electrode spacing and localized kinetics. To better predict results in the field, we use equivalent process parameters to evaluate performance at the lab-scale (ie. flow rate, current efficiency, etc.), in conjunction with fundamental electrochemical studies (eg. chronoamperometry). These methods have provided a reasonable correlation between results obtained in the lab and at industrial sites.Through trial and error, as well as focused R&D projects, we have had to delve deep into materials selection, electrode design, electronics, controls, and pre-treatment options, among other things. In this presentation, we want to share our journey from idea to product, with the hope of providing insight into what it takes to succeed in commercializing an electrochemical device.