High-growth Start-ups Research Articles

Institutional Change and Early-Stage Startup Selection: Evidence from Applicants to Venture Accelerators

Existing research at the nexus of institutional theory and entrepreneurship suggests that lowering institutional barriers to forming, growing, and exiting new firms through legal and regulatory reforms can affect the types of startups that entrepreneurs found in a region. These institutional changes could affect entrepreneurs' willingness to partner with organizational sponsors to develop high-growth startups and potentially enhance these sponsors' ability to select high-growth startups to fund and develop. This study evaluates these ideas by developing and testing three hypotheses, that institutional reforms (a) improve entrepreneurs' perceived benefits of the resources that organizational sponsors provide, (b) increase the number, quality, and diversity of applicants for these resources within sponsors' local ecosystems, and (c) enhance sponsors' capacity to select high-growth startups into their cohorts. To evaluate these hypotheses, I analyze data from 13,770 applicants to venture accelerators over multiple application cycles between 2016-2018 in 170 countries, using a difference-in-differences design that exploits institutional reforms that aimed to reduce the time and procedures to start new firms, obtain credit, and resolve bankruptcy for entrepreneurs. The findings have important implications for how institutional reforms affect early-stage entrepreneurship and the capacity of organizational sponsors to select high-growth early-stage startups to fund and develop within their local ecosystems.

Evaluating and comparing entrepreneurial ecosystems using SMAA and SMAA-S

This paper focuses on the entrepreneurial ecosystem as a set of interdependent and coordinated factors in a territory enabling entrepreneurship. To date, academic research has failed to produce methodologies for evaluating and comparing entrepreneurial ecosystems from different perspectives that can highlight the underlying factors. Moreover, there is a lack of empirical analysis that discriminates between factors according to their importance. Taking into account these two gaps, the aim of the paper is twofold. First, it proposes the application of an accurate, robust and reliable measurement technique, namely stochastic multicriteria acceptability analysis (SMAA). It considers the variability of weights that can be assigned to the different factors, producing a probabilistic ranking to obtain a comparison among entrepreneurial ecosystems. This ranking is more reliable than a single ranking proposed by the usual composite indices that take into account a single vector of weights. Second, the paper presents a new methodology, SMAA for strategic management analytics and assessment, or SMAA squared (SMAA-S), which detects the relation between entrepreneurial ecosystem factors and growth-oriented start-ups in a territory. The results show that the most relevant entrepreneurial ecosystem factors enabling the birth and activity of high-growth start-ups, and so impacting on technology, economy and society, can be identified in cultural and social norms, government programs, and internal market dynamics.

Uber: aggressive management for growth

Synopsis This case uses Uber Technologies Inc. to engage students in a serious conversation about how a firm both affects its stakeholders and is affected by its stakeholders as well as the role of strategic leadership in the amount of emphasis placed on ethical practices. Uber represents a visible high-growth startup that has received considerable positive and negative attention in the media; however, few people know of the extent of its aggressive management approach. Much of the publicity about Uber is both a direct consequence of and a direct consequence for stakeholder relationships. Students are asked to analyze Uber’s approach and offer suggestions for moving forward. Research methodology This case was created using secondary data sources. The issues for Uber that led the authors to write this case were not very flattering to Uber, and therefore, the authors decided to use secondary sources. Since Uber and many of its direct competitors were private companies, the authors collected as much financial data as the authors could from publicly available sources. Also, due to the contentious nature of some of the managerial tactics used within Uber, the use of secondary data sources was warranted. Relevant courses and levels This case was crafted with senior undergraduate students in strategic management as the primary audience, but is also relevant for MBA-level strategy courses as well. This case touches upon core content in the vast majority of undergraduate strategic management courses with a special emphasis on two concepts underrepresented in most strategic management textbooks, stakeholder theory and ethical decision making.

Which Entrepreneurs are Coachable and Why?

Is coachability a usable concept for startups? Using a dataset on high-growth startups in a prominent university incubator, we show that firm characteristics do predict which firms are likely to follow advice but that these “coachable” firms are not more likely to achieve positive outcomes. The reason is that advice may be rejected either because the firm is stubborn and uncoachable, or because the firm possesses capabilities related to the advice which is hard for outsiders to observe.

Entrepreneurial Growth Ambitions: The Case of Finnish Technology Startups

Technology startups are expected to be a major driving force of economic growth in Europe. The search for new high-growth startups has been particularly topical in Finland, the country that is known for its high-tech products – and the fall of Nokia’s mobile phone business. Although a record number of startups has been established in recent years, the previously identified challenge is that only a small percentage of entrepreneurial businesses are responsible for the lion’s share of economic benefits typically associated with entrepreneurial activity. Hence, we need better understanding of what level of growth technology entrepreneurs aim to create and why there may be differences in growth ambitions among them. In this study, we undertook interpretivist case study research in pursuit of rich, empirically grounded understanding of entrepreneurial growth ambitions in the context of Finnish technology startups. We interviewed entrepreneurs at a Finnish startup event and supplemented this information with data available publicly on the Internet related to the growth ambitions of startups. Our study sought to increase understanding of the different aspects of entrepreneurial growth ambitions, and to explore the relationship between context and growth. Based on the findings, we suggest that growth ambitions should be seen as a complex, socially constructed concept. The growth ambitions of entrepreneurs in our study were influenced, at least in part, by their startups' institutional and market contexts, the scalability of their business models, their personal characteristics and experience, and their perceptions of the barriers and constraints of the field. We conclude that startups have very different growth pathways: although the growth of one startup may depend on the talent of a few software developers, the growth of another startup may be based on its success in building international sales networks. As a result, to get most out of the support provided for a startup ecosystem, support activities should be tailored to different types of high-growth startups. Growing up is losing some illusions, in order to acquire others. Virginia Woolf (1882–1941) Author, publisher, and critic

여성의 고성장기업 창업이 저조한 원인

우리나라와 OECD국가의 여러 연구에 의하면, 고성장 창업기업이 일자리 창출의 가장 큰 기여자로서 지속적인 경제성장을 위해서는 이들 기업의 창업이 매우 중요하다. 여성의 경제활동 증가도 경제성장을 촉진하며, 여성의 창업률이 남성에 비해 저조하므로 여성의 창업증진이 경제발전에 도움이 될 것이다. 본 논문은 여성의 고성장 기업창업이 남성 창업에 비해 적은 원인을 찾기 위해서 여러 가지 기업실태조사 자료를 이용하여 여성과 남성기업을 비교 분석하였다. 여성창업은 전체기업의 34%를 차지하고 있으나 고성장 기업일 경우는 6% 이하의 점유율을 나타낸다. 여성기업의 특징은 남성기업에 비해 초기투자자금이 적고, 외부자금조달이 어려워서 소규모기업에 집중되어 있다. 창업을 위한 장애요인은 여성 과 남성기업이 매우 유사하지만, 여성기업의 남성기업과 차별화된 장애요인이며, 또한 여성의 고성장기업 창업을 어렵게 만드는 3가지 요인은, 외부자금 조달의 어려움(고성장 기업인 경우 자금조달의 어려움이 다른 산업에 비해 높게 나타남), 창업을 위한 아이디어와 경험 및 기술의 부족, 일 과 가정의 병행 어려움이다. 이 결과는 미국의 연구결과(자금조달의 어려움, 일과 가정의 병행 애로, 여성을 위한 멘토의 부족) 와 비슷한 결과이다. 여성의 고성장기업의 창업은 아이디어와 경험 및 지식의 부족과 관련되어 추가 연구가 더 필요할 것이다. Research on OECD and Korea have shown that high-growth startups are the keys to job creation and that these companies are very important for economic growth. Given that the large-scale entry of women into the labor force accelerates economic growth and women have far lower levels of participation in growth-oriented entrepreneurship than men do, accelerating female entrepreneurship could have positive effects on the Korean economy. This paper uses data from several databases to do a comparison analysis between women's and men's start-ups to explore the factors that explain the lag in building high-growth firms among women. Women startups make up nearly 34% of startups(defined as less than 7 years of establishment), but only 6% of high-growth startups. Women rarely own large businesses, reflecting their low levels of initial capital and outside financing. Regardless of gender, entrepreneurs face many of the same challenges in starting businesses, but this study shows three primary factors for female entrepreneurs that lead to a less high-growth startup: a greater financing gap than for men(this gap is more apparent for high-growth firms), a lack of ideas, knowledge, and experience(related to the lack of mentorship), and lastly the difficulty maintaining a work-life balance. The findings are very similar with those found in studie's in the US(financing gap, work-life balance, and lack of mentorship). Further studies are required to identify more specific factors behind the gender gap in ideas, knowledge, and experience.

Employment Dynamics of Australian Entrepreneurship: A Management Perspective

This article attempts to draw together the literature on high-growth firms and management capability using Australian Government data from the Expanded Analytical Business Longitudinal Database. We tracked cohorts of new micro-sized firms (startups) over five years from birth. Compared with startups that had a low employment growth trajectory, mediumand high-growth micro-startups exhibited higher financial performance, higher innovation activity, and a greater propensity to seek external (debt or equity) finance. From a management perspective, medium- and high-growth startups were also significantly more likely to monitor and assess their performance across a wider range of performance indicators. High-growth micro-startups exhibited significantly higher operational process and organizational/managerial innovation, a higher likelihood of foreign ownership, and a greater demand for equity finance than medium-growth micro-startups. This data is consistent with other evidence that suggests that sustained high growth comes from superior strategic management and may suggest an ongoing role for government policy in building firm management capability in order to foster employment growth. Entrepreneurs – the most successful, though not the only, practitioners of innovation – rarely stop to examine how they do it. Most of them simply get on with the job of creating value by exploiting some form of change – be it in technology, materials, prices, taxation, demographics, or even geopolitics.

Impact of public seed-funding on academic spin-offs

In the entrepreneurial economy of today, it is not the multinational firms which are the predominant driver in the creation of new knowledge, but the individual entrepreneur. Correspondingly, new ventures of small size are leading in commercializing new knowledge and transferring it to the market. This economic shift has been reflected by broad entrepreneurship policies, which aim at supporting the individual on the challenge of a high-growth start-up. However, prior experience shows that uniform entrepreneurship policies do not address the individual needs in different countries and ecosystems adequately. In this paper, we study the performance of academic spin-offs that received public funding from the German EXIST Business Start-Up Grant, a support program which aims at increasing the number of innovative start-ups from academia. Using a control group matching approach, we provide evidence that these start-ups are smaller by two full time equivalent employees, generate 1.7 times higher losses and have a nearly three times lower return on capital than science-based entrepreneurial firms with comparable characteristics in the first 5 years after foundation. We interpret these results to be primarily caused by the inferior financial contracting structure of the program compared to private venture capital funding and by the resulting adverse selection and incentive effects on the entrepreneurs. The evidence calls for rethinking public interventions in a national system of entrepreneurship.

OurCrowd: Growing a Crowdfunding Platform in a VC World

This case features the challenges of a startup in the crowdfunding space in 2015 as its leadership assesses potential sources of growth for the company s future. Founded in Israel in 2012 by a renowned venture capitalist, OurCrowd was a venture capital crowdfunding platform that strove to connect high-growth startups raising capital with accredited private investors from around the world. Its value proposition was to democratize an inefficient market for private equity that had historically been dominated by a small number of highly connected venture capital firms (VCs). The case asks students to put themselves in the shoes of OurCrowd s head of investor community as he prepares for a meeting with the company s board of directors to discuss potential strategies for growth: Should the company partner with the incumbent VCs it initially sought to disrupt, emphasize marketing its Portfolio Reserve fund, strive to provide its investors and investees with higher value-added services, target a broader swath of investors by aggressively marketing the platform in international markets, or attempt to go up-market and pursue increasingly larger deals with later-stage companies? Through assessing these options and discussing this case, students will learn about incentive problems in two-sided markets as well as how different types of crowdfunding platforms create value for users.

Seeing What Others Miss: A Study of Women Entrepreneurs in High-Growth Startups

AbstractA pressing question in entrepreneurial research is where opportunities come from. Prior research indicates that some opportunities stem from known parameters and outcomes; some are discovered through engagement with unknown but knowable factors; and others are unknowable until brought into being through a creative process. This paper explores the second and more prevailing view in entrepreneurial research – that individuals discover business opportunity – and examines how high-growth entrepreneurs perceive opportunity through engagement with the world. Survey results, based on responses from 165 women entrepreneurs in high-growth startups, indicate that individuals with a strong discover mindset act and think in ways that support opportunity perception. Coupled with a belief in her abilities, the entrepreneur is more likely to move from opportunity perception to new venture creation. Results from semi-structured interviews with women from the same population elucidate the survey findings and yield implications for entrepreneurial theory and practice.

Determinants of Valuation of Early-Stage High-Growth Start-Ups

This MBA dissertation examines the determinants of valuation of early-stage high-growth start-ups. This area of valuation is different from valuation of other types of companies, in that there is little to no historic financial data available and in most cases no plausible cash-flow projections to base a valuation on. Current valuation models base mainly on financial data, which makes it hard for them to explain the value of such young companies.The financial and nonfinancial determinants of valuation that currently exist in academic and practitioners’ literature are researched and developed into 39 hypotheses of possible determinants of valuation used by practitioners appraising these start-ups. The hypotheses are grouped in four distinct domains that arose for the literature review: People, Technology, Market dynamics and Cash flow.The hypotheses are surveyed in form of an internet mediated questionnaire, asking practitioners to assign levels for every determinant on a six-level Likert-like scale, and to assign a relative importance to every one of the four domains.The survey results are analyzed by calculating median, mean and mode and ranking the determinants by their median and mean. Diverging stacked bar charts visualize the results and show how close together the rankings of the validated determinants lie.Of the 39 developed hypotheses for possible determinants, 34 are validated. 27 of them have a mode of high contribution to start-up value or higher. So no highlight can be placed on any group of determinants or domains.While this research has established the determinants employed by practitioners, it also shows that valuation is a complex topic, no single domain holds the answers to valuation, and that further research is needed to develop the determinants into a valuation framework that will be enable practitioners to determine a start-up’s monetary value.

Heroes Today - But What about Tomorrow? Gazelles and Their Long-term Performance

Young high-growth firms, or gazelles, have been investigated predominantly with respect to their outstanding short-term performance. The paper at hand adopts a different approach by analyzing the long-term performance of such firms to shed light on the sustainability of these job-creating machines. Using the Danish Integrated Database for Labour Market Research, we find that former gazelles are not able to sustain their headstart in terms of performance in the long run. We demonstrate that gazelles are often outperformed by initially slower growing competitors, as high initial growth negatively affects a firm’s long-term survival. We also find that high-growth start-ups ultimately achieve lower employment growth and higher employee turnover. We explain these counterintuitive findings by arguing that an initial period of rapid employment growth impedes the emergence of a stable and efficient routine structure within the newly founded venture if expansion is undertaken too hastily. In turn, this impediment decreases these firms’ long-term performance, as the initial set of structures and routines or the lack thereof has a long-lasting effect on the organization’s development.

The role of business subsidies in job creation of start-ups, gazelles and incumbents

This study contributes to the empirical literature concerning the role of business subsidies in job creation. Our empirical analysis, using an extensive firm-level data, suggests that the impact of business subsidies on employment growth differs more between high-growth start-ups and other firms than between start-ups and incumbents. On average, all subsidies relate positively to the contemporary employment growth for both start-ups and incumbents. Furthermore, after subsidy reception, the employment of both start-ups and older incumbents receiving employment or other subsidies grows more than that of non-subsidized firms. However, we find that business subsidies do not provide a significant additional boost to either contemporary or after-subsidy growth for young high-growth companies. There are apparently some other factors that promote growth in young high-growth firms; these factors help foster strong growth in many cases with or without subsidies.

Overcoming the Gender Gap: Women Entrepreneurs as Economic Drivers

This paper explores the intersection of two issues that often are thought of separately: the need for sustained economic recovery in the United States, and the status of women’s entrepreneurship. Despite recent gains, women still lag behind men on key measures of startup activity, and their firms tend not to grow or prosper nearly as much. Typically, this is seen as a - women’s issue. It is framed as a problem to be dealt with for the benefit of women, in the interest of gender equality. In fact, it is an economic issue that affects everyone. Research has shown that startups, especially high-growth startups, are the keys to job creation and leadership in new industries. With nearly half of the workforce and more than half of our college students now being women, their lag in building high-growth firms has become a major economic deficit. The nation has fewer jobs - and less strength in emerging industries - than it could if women’s entrepreneurship were on par with men’s. Women capable of starting growth companies may well be our greatest under-utilized economic resource. And what would it take to develop the resource more fully? We at the Kauffman Foundation hope this paper will help to stimulate new thinking on the subject. The following themes run throughout: While every entrepreneur, big or small, helps the economy, the emphasis here is on those who start high-growth companies, which help the most. More women’s startups need to be aimed at growth targets far above the oft-cited benchmark of $1 million in revenues. There is a particular need for innovative, transformative new firms that can grow to serve global markets. Many (though not all) high-growth firms are built around new science and technology. With more women than ever entering these fields, the upside potential for women’s tech startups is huge. What it takes to succeed in business is not necessarily the same as what it takes to succeed in starting a business. While women have made great strides in breaking through the proverbial - glass ceiling - to advance to high rank within corporations, few have made similar strides in breaking out laterally - through what might be called the - glass walls - to start their own high-growth firms. What it will take‖ to have more high-impact women entrepreneurs includes all of the following: what women themselves might need to do, what men might do, and what might be done collectively in the way of public policies or private initiatives. Finally, to reiterate the main point: It is essential to see women’s entrepreneurship as an economic issue, not a gender-equity issue. When new companies and industries flourish, everyone benefits. And the returns will increase when more women contribute to the process by bringing their ideas to market and building high-growth firms around them.

Regional variations in new firm job creation: The contribution of high growth start-ups

Much existing work argues that a small number of high growth start-ups create the majority of new firm jobs; that policies aiming to increase the volume (i.e. number) of start-ups in the UK’s less entrepreneurial regions may adversely affect their growth or quality; and, therefore, policy should target high growth new starts. To test these arguments, a database of all UK independent limited companies set up between 2001 and 2005 still operating in 2008 was constructed and analysed. In 2008 there were 351,000 such start-ups with 1.51 m employees. Defining high growth as firms with over 24 employees in 2008, high growth start-ups did not create the majority of new firm jobs and the ‘job creation problem’ in the UK’s less entrepreneurial regions is too few start-ups rather than a relative absence of high growth start-ups. Consequently, in the UK’s less entrepreneurial regions policy should aim to increase the volume of start-ups.

Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator

Many startup companies go through the so-called “entrepreneurial crisis” when they reach a headcount somewhere between 50 and 100 employees. At this point, the CEO and her team have to transition from a personal to a professional management style. Management systems play a critical role in managing this transition effectively. Contrary to the popular belief that the development of such systems kills the entrepreneurial spirit, startups that implement these systems are associated with faster growth, larger size, and a lower turnover of their CEOs. Venture capital backed startups are more likely to implement these systems faster. This article also examines why these systems are adopted and the different roles they play in high-growth companies.

High Growth Entrepreneurs, Public Policies and Economic Growth

This paper investigates whether the presence of ambitious entrepreneurs is a more important determinant of national economic growth than entrepreneurial activity in general. We use data from the Global Entrepreneurship Monitor to test the extent to which high growth ambitions of entrepreneurs affect GDP growth for a sample of 36 countries. Our results suggest that ambitious entrepreneurship contributes more strongly to macro-economic growth than entrepreneurial activity in general. We find a particularly strong effect of highexpectation entrepreneurship for transition countries. These results are interpreted in light of the ongoing debate about public policies designed to stimulate high growth start-ups.

Interpretive Analysis as an Evaluative Tool: The Case of Mustard.UK.Com, a High-Growth Small Business Programme

The authors suggest that a more interpretist analysis of policy design, development, and implementation that takes into account antecedent factors, context, reflective change, and user and advisor perception and expectations would make a significant contribution to the field of policy evaluation. This concept is considered further using a qualitative assessment of the West Midlands response, Mustard.UK.Com (Mustard), to the government's High Growth Start-Up scheme set out in the Department of Trade and Industry's Competitiveness White Paper in 1998. The assessment has three elements: first, an exploration of the extant literature to identify any relevant antecedent factors that may have informed or influenced the decisionmaking process when the West Midlands response was being developed; second, a review of the procedure by which the various parties involved in the implementation of Mustard created a framework within which a workable support programme could be delivered; third, the extent to which Mustard has been successful in meeting the objectives of those stakeholders involved in the programme is considered.

Targeted Support for High-Growth Start-ups: Some Policy Issues

Launched in 1999/2000, the new high-growth start-up programme is part of a shift in small and medium-sized enterprise (SME) policy in the United Kingdom away from a narrow focus on supporting established businesses with growth potential, to include start-ups and other types of SME. In this context, the authors consider some of the policy issues surrounding the design, development, and implementation of the new programme, with the aid of results from in-depth research in the East Midlands region. After a brief description of the new enhanced support programme for high-growth start-ups, and the policy context in which it was introduced, the authors review the support needs of this type of business and how the new programme might contribute to addressing these. In the final section they consider some of the wider policy issues raised by the programme in terms of the extent to which: first, effective regional models can be developed to encourage widespread participation by appropriate private sector organisations; second, access to appropriate finance, including seedcorn and venture capital, can be increased for high-growth-potential start-ups; third, universities are able to contribute to the generation of new business activity and become integrated into regional business support infrastructures; and fourth, the enhanced support programme is tuned to the needs of the target group and is effectively delivered.

Employee Startups in High-Tech Industries

Various theories that can account for employees leaving incumbent firms to start their own firms in the same industry are discussed. The theories are evaluated using evidence from three new and one old study of such employee startups in high-tech industries and from studies of high-tech and high-growth startups of all kinds. A new, evolutionary-based theory that builds on and extends existing theories is sketched out to provide a novel interpretation of the evidence. Copyright 2001 by Oxford University Press.