Stage Start-ups Research Articles

A Case-based Evaluation Model of Venture Investment Contract Method and Its Application to ‘Simple Agreement for Future Equity’

Purpose - In this paper, we examine prevailing venture investment contract methods employed by the venture capital community in Korea in order to assess the extent to which they are actually beneficial for developing and nurturing early stage start-ups. Design/Methodology/Approach - We evaluate the validity of SAFE (Simple Agreement for Future Equity), a recently adopted investment contract modality in Korea by comparing its position relative to RCPS or Redeemable Convertible Preferred Stock which is established as the most prevailing investment contract method. In doing so, we analyze data on Venture Capital investment contract during the period from 2015~2019 in Korea, through the conduct and qualitative assessment of multiple case studies of early start-ups. Findings - We find that the venture investment community in Korea has been relying disproportionately on the RCPS as the prefered venture investment contract method, which, however, works against the interests and success of the start-up by imposing too much risk on the entrepreneur and binding him/her to repay the invested capital at the expense of the longer-term viability of the firm. Research Implications - The implication of our study is that striking a good balance between the investor’s risk reduction in redemption and the sustainability of the start-up operation is the key to the successful design and implementation of the institutional framework for venture investment.

A Hybrid Business Success Versus Failure Classification Prediction Model: A Case of Iranian Accelerated Start-ups

The purpose of this study is to reduce the uncertainty of early stage startups success prediction and filling the gap of previous studies in the field, by identifying and evaluating the success variables and developing a novel business success failure (S/F) data mining classification prediction model for Iranian start-ups. For this purpose, the paper is seeking to extend Bill Gross and Robert Lussier S/F prediction model variables and algorithms in a new context of Iranian start-ups which starts from accelerators in order to build a new S/F prediction model. A sample of 161 Iranian start-ups which are based in accelerators from 2013 to 2018 is applied and 39 variables are extracted from the literature and organized in five groups. Then the sample is fed into six well-known classification algorithms. Two staged stacking as a classification model is the best performer among all other six classification based S/F prediction models and it can predict binary dependent variable of success or failure with accuracy of 89% on average. Also finding shows that “starting from Accelerators”, “creativity and problem solving ability of founders”, “fist mover advantage” and “amount of seed investment” are the four most important variables which affects the start-ups success and the other 15 variables are less important.

Communication management of start-ups - An empirical analysis of entrepreneurs’ communication and networking success on Facebook

Social networks attract increasing attention from practice and academia, yet social media networks as part of a start-up's strategic communication efforts remain under-studied. To fill this gap, we conceptualise start-up social media communication within the framework of communication management theory. We set up five hypotheses regarding the influence of different communication activities on start-ups' communication success and the moderating role of firm age. We collected data through structured questionnaires using a sample size of 244 start-ups in Germany and ran ordinary least squares (OLS) regression analyses. Results indicate that social media communication management is a significant driver of communication success. Two main factors, environmental scanning and networking, are revealed. Furthermore, we find different communication and networking practices depending on the start-up's age: In early phases, ad hoc monitoring, personal networks and business-to-consumer networking are key elements. In contrast, a long-term communication plan, professional networks and business-to-business networking are crucial in later stage start-ups.

Corporate Governance and its Importance in the Startup World

Corporate Governance research in the context of emerging economies has received increasing attention in recent years. Most of the big companies have already started following the standard protocols of Corporate Governance. However, the world of startup is not generally included when the importance of Corporate Governance is discussed. This attitude has led to a lot of early stage startup closure and undervalued acquisitions. Startups need to rope in a number of Corporate Governance guidelines so that these can contribute towards the growth of the organisation, as well as minimize failure and risk.

Startups and Company Law: The Competitive Pressure of Delaware on Italy (and Europe?)

US corporate law and, in particular, Delaware law, which leaves ample room to freedom of contract, has been one of the reasons for the successful creation and financing of startups in Silicon Valley. We analyze the Italian attempt to modernize company law in order to promote startup creation within the wider movement of company law simplification and modernization around Europe. In Italy a suitable corporate law statute for early stage startups was missing. Italy is a dual system jurisdiction. The SPA (public company type) has at least part of the required financial flexibility, but it is still burdened by European rules on legal capital and inflexible rules concerning management and controls. The SRL (private company type) offered a lot of leeway as to the management of the company, but left no room for freedom of contract with regard to financing, since it was not imagined as a vehicle for investors. In response to competitive pressure, economic aspirations and social changes, and to general demands from European institutions for some forms of facilitation of firm creation and venture capital, the Italian lawmaker has slowly transformed the SRL and created what is basically a new type of company (the SME SRL), which lies in between the two original types but whose borders are not fully clear. The ambiguous character of this company form makes it a problematic model for venture-funded startups. On the basis of our analysis, we argue that Italian corporate law is under competitive pressure from Delaware rather than from inter-European competition on corporate charters, and that path-dependance and remaining limits to freedom of contract burden Italian company law and prevent economic growth. We make some policy suggestions, among which the introduction of a counter-Satzungsstrenge principle for private companies.

An Empirical Study of Sources of Early Stage Start-Up Funding for Innovative Startup Firms: A Study of Five States of India

Over the past few years, startups have been seen as a taste of the season for India. This has resulted into the materialization of a number of home grown new companies across the country. This development of a novel scenario has been due to the major contributions that led to the mega funding ploughed into most of these new companies between 2007 and 2015. This paper represented the growth of startup companies in India, their types, and possible sources of financing with special emphasis on financing these ventures in the country. In this research, we examined the defining stages of development for startups as well as their funding sources at each stage. The objective of this research paper was to investigate whether India made a shift from conventional to the modern methods of financing. Therefore, this research can be helpful in superior understanding about the funding strategies of entrepreneurial ventures. For conducting the research, a total of five states, that is, Odisha, Chhattisgarh, Jharkhand, West Bengal, and Madhya Pradesh were taken into consideration. This paper is primarily based on survey questionnaires, and the chi-square test was adopted to ascertain the results derived from the information gathered from the respondents. The results revealed that there is an urgent need to provide financial literacy to startups and increase awareness on the activities of angel/VC financing through greater involvement with educational/research institutions and incubation centres.

Venture Capital Networks in Southeast Asia: Network Characteristics and Cohesive Subgroups

Venture capital firms (VC) have encountered with uncertainty and risk of asymmetric information due to an investment in early-to-growth stage start-ups with technology-based and high growing potential. Venture capital syndication network helps reduce a broad gap of information asymmetry in a venture capital investment. Moreover, network connections are found to be the success factor for venture capitalists under a lack of fully-developed institutional environment in emerging market. Venture capital industry in Southeast Asia is nascent yet in demanding and fast growing. Despite a decline in the number of venture deals in the US, the deals keep surging in Southeast Asia (SEA), one of the most significant and dynamic propellers of the world economy. To develop the entrepreneurial ecosystem in SEA, it is interesting to examine how VC firms are connected to one another. Even though several literatures found some distinctive network characteristics amidst the US, European and Chinese venture capital market, the Southeast Asian has left unattended. In this paper, we initiate the network of venture capital firms among Southeast Asian nations and explore its relationship through social network analysis. The purposes of this study are to investigate the topological and statistical properties of VC network consisting of small-world behavior, power law distribution, centrality measure such as degree, closeness, and betweenness. In addition, we diversify different levels of connection into subnetwork and examine the influential groups of VCs in Southeast Asia. We initiate the empirical study on the characteristics of VC network across different countries in Southeast Asia using the unique hand-collected dataset of syndicated deals. Social network analysis has initially and preliminarily been applied to the VC network in this region. This paper contributes to VC network literature in providing a unique network structure and network metrics of venture capital in SEA. In managerial contribution, this study provides more structural VC cooperation towards the government and cooperates, who can facilitate more open innovation practices to create a better open environment and innovation ecosystem among accelerators, investors, and startup companies (including SMEs). The results also confirm previous evidence of significance on networks in emerging market that there is a presence of a strong venture capital network in this region, even if the institution and regulation are claimed to fall behind that in the developed region. This research introduces the fact that the venture capital network in Southeast Asia has small-world pattern and Singapore acts as a hub of venture capital market in the region. Topranking VC firms have been listed by network centrality across nations. Multi-company syndication is prevailing in Southeast Asia.

An axiological measure of entrepreneurial cognition

PurposeThe purpose of this paper is to expand the recent lines of inquiry into entrepreneurial cognition by focusing on the structure of values as an important aspect of cognition. Value theory, or axiology, posits that the capacity to value and to make value judgments is a distinctly human function – one that is a higher order process than is pure cognition alone.Design/methodology/approachThis study is designed as a quantitative discovery. A well-established assessment instrument from the field of value science is used to measure deep-seated, evaluative thought patterns for a sample of founders of early stage startups and a comparative sample of senior managers. Value structures underlying cognition for individuals across these samples are compared to reveal both similarities and differences between the groups.FindingsThis study identifies a cognitive process underlying opportunity recognition, evaluation and exploitation, known as integration. This study finds that entrepreneurs have stronger capacities for integrative thinking than do managers. In contrast to other published research, this study finds that early stage entrepreneurs are not characterized by hubris, an inflated sense of self-efficacy, nor an exceptional capacity for action.Originality/valueThis paper extends the study of entrepreneurial cognition by applying an empirical measure of the foundational levels of cognition. It reveals heretofore unarticulated differences, as well as similarities, between entrepreneurs and managers.

Sharing Economy Startups: New Wave of Networked Business Models in the Changing World

The relatively new phenomenon called sharing economy, or collaborative consumption, is best known by the companies like Airbnb and Uber. These companies use mobile applications and web platforms to match people willing to share a room or a car with others who need a ride or a place to stay. The peer-to-peer economy has disrupted traditional business models and upset the regulatory status quo (Shueh, 2014). Sharing economy has challenged mature industries, such as hotels, restaurants, cars, by providing consumers with convenient and effective access to resources without the financial, emotional or social burdens of ownership. In that sense, sharing economy is also an access economy (Eckhardt & Bardhi, 2015). There is a whole bunch of new startups springing up and joining the sharing economy movement. Companies are inventing new ways of integrating customers in their value creation processes in order to enhance the success of new service concepts. In this study, sharing economy is defined as a set of practices and business models based on horizontal networks and the participation of a community (Ouishare; Ismail, 2014). The aim of this study is to increase understanding of how the new networked startups operate and how they create value for their customers. We especially look at the role of platforms, the innovations in organizing the business and the role of the networks and communities. The data is collected from a Finnish sharing economy startup operating in the restaurant industry (lunch leftovers). The early stage startups’ business model is compared to the leading startups in the sharing economy. The data is collected by interviewing the entrepreneurs, drawing the customer journeys and visualizing the elements of their business models. A case study is used as a method because the study aims to explain what kind of business models sharing economy startups use and what is the role of the different elements in their success in partnerships, resources, customer relationships, and communities. A Case study is relevant when the study requires an extensive and in-depth description of the phenomenon (Yin, 2014). As a result, this study will provide insight into how the new sharing economy startups organize their businesses to create unique value for the customers. This article will contribute to the increasing interest of enhancing customer experience and raise some key elements for the success factors of the sharing economy. Also, the study will highlight the possibilities of digital platforms enhancing the growth and internationalization of startups.

Signaling by early stage startups: US government research grants and venture capital funding

Signaling by early stage startups: US government research grants and venture capital funding

Finding the Unicorn: Predicting Early Stage Startup Success Through a Hybrid Intelligence Method

Artificial intelligence is an emerging topic and will soon be able to perform decisions better than humans. In more complex and creative contexts such as innovation, however, the question remains whether machines are superior to humans. Machines fail in two kinds of situations: processing and interpreting “soft” information (information that cannot be quantified) and making predictions in “unknowable risk” situations of extreme uncertainty. In such situations, the machine does not have representative information for a certain outcome. Thereby, humans are still the “gold standard” for assessing “soft” signals and make use intuition. To predict the success of startups, we, thus, combine the complementary capabilities of humans and machines in a Hybrid Intelligence method. To reach our aim, we follow a design science research approach to develop a Hybrid Intelligence method that combines the strength of both machine and collective intelligence to demonstrate its utility for predictions under extreme uncertainty.

Redivivus Technologies Pvt Ltd

Mr. Govinda Mahajan, MD of Redivivus Technologies Pvt Ltd (RTPL) started the automation IT solution organization 2010 in Pune. He was going through the analysis phase of the current business model with the objective of achieving future growth. As an entrepreneur he wanted the business to expand from its current segment of Printing automation and Auditing Automation and other IT Automation solutions. The critical point came in, when one of his friends in manufacturing requested him to make a customized SME level ERP software solution. GM (As he was popularly known in his company) analyzed the feedback on this product and to his surprise it was very user-friendly product, giving good business returns to his friend. Since GM was looking to expand into new business segments with his organizational expertise, he saw a great opportunity in this product. Now the dilemma, whether SME level ERP solution could be the segment (where he could focus to increase his product portfolio for growth) was to overcome. Future marketing strategies of RTPL could be modified only if this major decision of foraying into SME level ERP segment was taken before the meeting in December 2015. GM had to take decision fast, as he did not want to miss out on the opportunity created by the Make in India Buzz. Govinda had multi fold challenges for Redivivus Technologies- 1) Was it possible to gain new and large number of customers in SME Level ERP solutions? 2) Analyzing about his organizational capabilities for SME level ERP segment. 3) Could RTPL compete with the established competitors? GM was very concerned about not losing focus from his current business, at the same time not ready to lose this opportunity. He had to prepare a complete blueprint of the plan before Dec 2015 so as to capitalize on the same. The case revolves around the marketing dilemma of Mr. Govinda on what should be the marketing strategy ahead. The case addresses issues of marketing strategy of small IT service businesses. The case also gives insights about entrepreneur's dilemma evolving in changing business scenario. It can be also taught for addressing issues of changing business models, service marketing, building brand equity and STP (segmentation-targeting-positioning). Learning Objectives of the Case : 1. To understand insights of a business model for an IT service organization. 2. To understand market development and product development in the context of a growth stage Startup Company. 3. To analyze the impact of marketing environment on the business model 4. To develop market development plan for Redivivus Technologies Pvt Ltd.

Network brokers or hit makers? Analyzing the influence of incubation on start-up investments

Incubators are a prominent way to support technology based start-ups. Yet, it remains unclear to what extent these incubators enhance start-up performance, nor is it known through which mechanisms this would occur. In this paper we test two mechanisms to explain the relationship between incubation and the amount of investments raised by early stage start-ups as performance measure. The ‘hit maker’ mechanism refers to beneficial effects of the direct transfer of resources and organizational or business knowledge from the incubator to the start-up. The ‘network broker’ mechanism refers to the benefits that start-ups enjoy from being connected to external funding sources through the incubator’s networks. We test which of these mechanisms contribute to the performance of early stage start-ups. Our data comes from a unique survey from 935 entrepreneurs with early-stage technology based start-ups in Western Europe and North America. We find that incubators have a positive effect on (1) the amount of funding that start-ups attract and (2) the ability of start-ups to attract funding from formal investors and banks. Moreover, our results provide evidence for the network broker mechanism, but not for the hit maker mechanism.

You can't always get what you want: How entrepreneur's perceived resource needs affect the incubator's assertiveness

A possible explanation for the disappointing performance of incubators is that start-ups do not take full advantage of the resources offered by the incubator. In explaining the low usage of the incubator’s resources, existing studies neglect that incubated entrepreneurs may not be aware of the gaps in their resource base. Using qualitative data from six European incubators, we identify start-ups' resource needs as perceived by incubator staff and by entrepreneurs. Further, we explore the implications of differences in perceptions for the incubator's assertiveness. We find that entrepreneurs are unable to use the incubator's resources to develop missing intangible resources: entrepreneurs are not aware of their resource gaps, hesitant to step out of their comfort zone, and primarily short-term oriented. In order to ensure that start-ups develop a comprehensive resource base, incubators supporting early stage startups were found to take an assertive strategy, creating self-awareness among entrepreneurs, and encouraging them to make use of the incubator's resources. Our study adds to current incubator literature by providing a more comprehensive explanation for the low usage of the incubator's resources, by identifying circumstances under which an assertive strategy is desirable and by exploring the practices through which an assertive strategy can be implemented.

EYE ON CHINA

China Unveils Plan for Basic Science Research. China Brain Project to Launch Soon, Aiming to Develop Effective Tools for Early Diagnosis of Brain Diseases. China Pins Hopes on Scientific Innovation. Sanofi Strategic Health Project Aimed at Improving Community Chronic Disease Management Capabilities. RegeneRx and Lee's Pharm Announce Acceleration of RGN-259 Development in China. Institute of Biophysics Research Clarifies Light-harvesting Process in Plants. High-Tech Program on Microbiome-Based Research Launched in Qingdao. HONG KONG NEWS – Lenovo Launches its Accelerator Incubator for Early Stage Start-Ups.

ENTREPRENEURSHIP 3.0: TOOLS TO SUPPORT NEW AND YOUNG COMPANIES WITH THEIR BUSINESS MODELS

In 1983, Time Magazine referred to the new economy as a transition from a production-oriented industry to an economy based on new technology. Later on, it was dubbed a service-oriented and knowledge-based economy. Today, it is also closely linked to sustainability and ecology. The new economy initiates new initiatives from the crowd. This is, for example, reflected in crowdsourcing and open innovation and can lead to open business models. Without the latter, innovators and/or entrepreneurs will fail to provide or capture the value they create with their innovations. Innovations in business models are more important for society and for companies than the technological innovations itself. After all, new technology has no chance of success in the market without a good business model. Therefore, the established traditional business models from the past should be turned into more socially driven models that take into account new societal challenges. The ‘Entrepreneurship 3.0’ Research Centre focuses on new business models to support pre- and early stage start-ups with setting up a new business model and, on the other hand, to guide growth SMEs in the transition towards a new model. We will do this by acquiring insights through evidence-based research and by developing tools and methodologies. Entrepreneurship 3.0 focuses on business model innovation in general and on some topics in particular: sharing & collaborative economy, 3D & materialize economy, blue economy & cradle-to-cradle, crowdfunding and the entrepreneur.

Critical Factors in the Selection of Start-Up Incubator Residents

Incubators have played an increasing role in nurturing early stage start-ups in recent years. Meanwhile, the competition in the selection of start-ups for entering prestigious incubators is also growing. Previous studies have introduced some screening factors in the selection process, largely based on interviews and surveys of the opinions of incubator managers. Despite diverse findings by far, there have been no effort to identify the key selection criteria and factors using real startup company profiles. This research proposes an assessment method based on the Real-Win-Worth framework. This new method is used to evaluate a data set of 280 application profiles of start-ups submitted to JFDI.Asia, a prestigious incubator based in Singapore. Our results suggest “working website”, “recommendation”, “demand validation”, “market demographics”, “concept maturity”, “sales/distribution channel” and “technology expertise” are crucial for the start-ups to pass initial profile screening. After the screening stage, “competitive advantage”, “prior start-up experience”, “feedback mechanism” and “growth potential and strategy” are critical for the final admission into the incubator. The assessment method and these findings could help entrepreneurs self-evaluate and improve their start-ups for successful selection into competitive incubators, and also support incubator managers in making selection decisions systematically.

멘토의 역량과 멘토링 기능이 창업의 초기성과만족도에 미치는 영향에 관한 연구

This study reports on initial founder performance and satisfaction that is affected by mentoring skills and mentoring functions. Through the empirical analysis, seen the initial founder performance and satisfaction as a respective dependent variable, this study intends to provide efficient direction of the responsibility mentor and present a method that enhances the survival of the initial start-up founder. The frequency analysis was conducted to determine the general characteristics of the sample, by leveraging the statistical package SPSS 20.0 for Windows program, details of the items measuring tools present a statistical analysis of sample data, 120 people have gathered in the survey data for this factor analysis was performed with a correlation to classify each region was calculated to Cronbach`s factor to determine the reliability of the measurement tool, and tested the hypothesis using linear regression analysis for verification. Was found to play an important role to draw the founder and mentor mentoring skills and capabilities in early stage start-ups, and conclusions drawn from this process. In particular, modeling of the mentor with a sound mind and behavior brought the better performance and satisfaction of the initial start-up founder. If a mentor provides mentoring with more interests in career development and psychosocial functions of the mentoring functions, it is seen to be more efficient way to improve survival rate of initial start-up as well as increasing a founder`s performance and satisfaction.

>>venture>>: Support for Early Stage Start-ups and Potential Entrepreneurs.

>>venture>>, the leading Swiss-wide business plan competition, is an ideal partner for young start-ups and entrepreneurs. For the upcoming tenth anniversary edition the competition will receive an update. Building upon a successful base of the past nine editions and equipped with contemporary networking events and more know-how transferring seminars, >>venture>> will fit even better into the Swiss start-up ecosystem.

초기 게임개발사 가치평가 모형 사례 연구

초기 온라인 게임 개발사의 기업가치를 평가함에 있어서 실물옵션이 효과적이라는 것은 이론적으로나 실증적으로 이미 밝혀진 바가 있다. 하지만, 실물옵션 방법론 역시도 비재무정보를 효과적으로 반영하는 데에는 한계가 있기 때문에 이를 효과적으로 반영할 수 있는 수정 실물옵션 방법론이 이론적으로 제안된 바가 있다. 하지만, 이에 대한 실증 연구가 미비해서 그 효과성을 검증하는 데에는 한계가 있었다. 따라서 본 연구는 사례 연구를 통해 수정 실물옵션 방법론이 초기 게임 개발사의 가치를 효과적으로 측정할 수 있는지에 대해 검증하고자 하였다. 분석 결과, 수정 실물옵션 모형은 초기 단계의 게임 개발사의 비재무적 정보를 모형 내에 효과적으로 반영하며, 이로 인해 예측 오차를 크게 감소시키는 것을 확인할 수 있었다.