Venture Capital, Corporate Venturing and Angels: the relation between different finance methods and the success of start- and scale-ups

Abstract

Introduction/Theory: innovations developed by start- and scale-ups can contribute to overcome current societal issues, but most of them fail to reach the market due to lack of investments. While it is widely known that start- and scale-ups are in need of financial resources, the influence of different financing methods (venture-, corporate- and angel investors) on the potential success, is not identified so far. This research investigates the used type of financing method and compares it to the success of start- and scale-ups. For the theoretical framework, the resourcebased view and the VRIN-model are used to develop an instrument to assess the success of a company.

Method: using the Techleap database, 360 start- and scale-ups were assessed. These start- and scale-ups all received funding and provided enough information. A start- and scale-up assessment method was created to generate a success score, that includes the resource-based view and the VRIN-model. After splitting the data into two datasets (one including startups, the other one including scale-ups), a logistic regression was performed. Besides this, three different robustness tests were performed.

Results: the findings show that corporate capital or the combination of corporate- and angel investors have a negative effect on the success of startups, compared to the use of merely venture capital. For scale-ups, the use of all three finance methods have a positive effect on the success of the business, compared to using only venture capital. However, the impact on the corporate success is considerably small. Besides the finance methods, the amount of employees working at the organization shows to have positive impact on the success of the business. Considering some additional control variables. startups profit mainly from sustainability, a CSR policy and a commercialized product, while participation in a contest and the CSR policy is positively related for scale-ups.

Discussion/Conclusion: while there is some relation between some of the finance methods and the success of the start- or scale-up, the impact is considerably small. The (additional) control variables have a positive relation to the success score as well. There are two main contributions of this research. First, it develops the start- and scale-up assessment method, which can be used by investors to estimate the expected success of an organization. Second, while there is already some research done on the relation between different finance methods and corpor