Do Company Builders Create Jobs? Examining the Rise of Incubation Finance in Germany

Geographies of relational coordination in venture capital firms

“…The relevance of this ongoing diversification in entrepreneurial finance can also be sensed in the number of special issues being published on the topic in recent years (Block et al, 2018;Bruton, Khavul, Siegel, & Wright, 2015). Forms of VC investors that have emerged in the previous ten years, for example, include seed accelerators (Miller & Bound, 2011) or company builders (Scheuplein & Kahl, 2017). Further, different sorts of governmental VC funds have been implemented widely to address funding gaps (Cumming & Vismara, 2017).…”

“…On the one hand, the spatial structure of VC in Germany is rather decentral , while on the other hand, Berlin, Munich and to a lesser extent Hamburg and Cologne are among the pre-dominant hubs for VC activity in Europe (Kraemer-Eis, Signore, & Prencipe, 2016). Further, the German VC industry has changed significantly in recent years, both in terms of size (only about one-third of the firms in the sample were older than ten years in 2015) and in terms of geography, as more VC activity has focused on Berlin recently (Scheuplein & Kahl, 2017).…”

“…In most cases, external VC investments are used to facilitate the growth of the investees after reaching a certain stage, however. The role of portfolio startups in this setting is thus less one of 'investee' but one of 'subsidiary' being actively developed to be sold after a long period of engagement (Scheuplein & Kahl, 2017). Through focusing on specific digital industries and growth patterns, the investments are similar in their organizational trajectory and can be scaled quickly.…”

“…A new and radically different approach to investment target choice is that practiced by 'company builder' VC firms. Here, the entrepreneurial initiative is started by the investor itself and an 'entrepreneurial team' subsequently hired, while the VC remains the dominant shareholder (Scheuplein & Kahl, 2017). This approach implies a high degree of organizational proximity, which is retained to nurture the portfolio startups with hands-on support until they reach a certain size.…”

“…Curiously, most company builders are in Berlin (see Figure 3). Since Berlin has developed into the predominating centre of startup activity in Germany in recent years (Acs, Stam, Audretsch, & O'Connor, 2017;Scheuplein & Kahl, 2017), this suggests that social and institutional embeddedness within an 'entrepreneurial region' (Saxenian, 1994) is a relevant asset for these complex operations.…”