Reviewing equity investors’ funding criteria: a comprehensive classification and research agenda

Ferrati, Francesco; Muffatto, Moreno

doi:10.1080/13691066.2021.1883211

Cited by 31 publications

(16 citation statements)

References 11 publications

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“…A brief explanation on each of these variables, based on the given briefing, is provided in the supplementary material (Appendix 1). The given explanation resonates with the description mentioned in the following studies: Ferrati and Muffatto (2021), Šimi c, (2015) and Muzyka et al (1996).…”

Section: Methodssupporting

confidence: 85%

Firm selection for government venture capital funding to youth tech-based startups

Sharma

2023

JRME

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Purpose The purpose of the study is to review and understand firm selection mechanism involved in government venture capital (GVC) funding and identify key factors influencing selection of tech-based firms for GVC funding. Design/methodology/approach This paper is based on real-time methodology. The data was generated from interviews of 60 young applicants, who applied for startup funding, and analyzed using statistical techniques to draw the results. Findings This review identifies financial viability, market viability and technological innovation to have the strongest predictive ability in firm selection process of the GVC funding program for tech-based youth-owned startups in the first round of interview. This review also highlighted that social impact is not a statistically significant variable in firm selection process in GVC funding. Originality/value This study tests the validity of the theory of GVC based on quantitative analysis of field data and identifies key factors with strong predictive abilities for GVC funding, more particularly for the youth-owned tech-based startups. This study brings to light the mechanism adopted for GVC funding and addresses gaps in the literature relevant to firm selection mechanism in GVC programs. This study would help GVC Fund Managers to review their own GVC programs in terms of selection mechanism and help them in appropriate designing of such programs.

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Section: Methodssupporting

confidence: 85%

Firm selection for government venture capital funding to youth tech-based startups

Sharma

2023

JRME

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“…Therefore, entrepreneurial competence is a key consideration for early-stage equity investors (Brush et al, 2012;Landström, 1998). The majority of entrepreneur-level investment criteria identified (Ferrati & Muffatto, 2019;MacMillan et al, 1985;Sudek, 2006) fall under the broad dimension of competence (e.g., education, experience, expertise, track record, market knowledge, preparedness) and competence-enhancing personality traits (e.g., persistence, commitment, resilience), while the minority fall under the broad dimension of potential for cooperation (e.g., coachability, likability, trustworthiness). This suggests that investors are more sensitive to information about the entrepreneur's competence than to information about the entrepreneur's cooperativeness.…”

Section: Primacy Of Competence In Evaluation Of Early-stage Entrepren...mentioning

confidence: 99%

The Role of Entrepreneurs’ Perceived Competence and Cooperativeness in Early-Stage Financing

Svetek

2022

Entrepreneurship Theory and Practice

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Building on social-psychological insights into social perception and judgment and empirical findings from the entrepreneurship literature, we propose that early-stage equity investors look at two main dimensions to assess entrepreneurs seeking early-stage financing: competence and cooperativeness. In all, 84 angel investors and venture capitalists active in Europe participated in a conjoint experiment. The results show that investors prioritize entrepreneurs’ competence over their cooperativeness. Entrepreneurs’ competence is even more appealing to investors when combined with coachability. We find that entrepreneurs can compensate for a lack of experience by demonstrating solid market knowledge and appearing to be coachable. Furthermore, the results suggest that investors differ in their consideration of entrepreneurs’ cooperativeness, but not competence, when making investment decisions—a finding that is conditional on investors’ usual level of involvement in their portfolio ventures. We discuss these findings from a theoretical and practical perspective.

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“…The methodological approach used here separated the assessments of the entrepreneurs’ attributes and investors’ evaluations of funding potential and involved real-time pitches to venture capitalists and business angel investors. Previous research on entrepreneurial pitches has underlined the impact of different characteristics in start-up funding (Ferrati & Muffatto, 2021; Gompers et al, 2020), but as argued in a recent theoretical study, ‘the nuanced and intricate decision process of resource providers deciding whether to support an entrepreneurial endeavour is largely unexplored (Fisher & Neubert, 2022). Recent qualitative and quantitative research on investors’ decision-making has emphasised the role of the entrepreneur in decision-making (Huang, 2018; Huang & Pearce, 2015).…”

Section: Discussionmentioning

confidence: 99%

“…It focused on the selection phases, which were found to play a meaningful role in achieving the returns sought by investors. In fact, the success of the next steps depends on the outcome of this initial step (Ferrati & Muffatto, 2021). Its first contribution is grounded in its presentation of a holistic model that examined the effects of entrepreneurs’ attributes on the evaluation of funding potential based on a combination of dual-processing and signalling theories.…”

Section: Contributionmentioning

confidence: 99%

The Effect of Entrepreneur Attributes on Investment Evaluations in Pitch Competitions

Lavi

Yaniv

2023

The Journal of Entrepreneurship

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Investment in early-stage ventures entails significant risk and uncertainty; for this reason, most investment pitches do not result in investments. Whereas the literature in entrepreneurial financing indicates that investors rely on their gut feelings, it remains unclear which entrepreneur attributes factor into this type of intuitive judgment. This study presents a holistic model of entrepreneur attributes as they relate to inventors’ evaluation of funding potential. The model is divided into three categories: entrepreneur–investor relational attributes, entrepreneur motivational attributes, and venture performance-influence attributes. The model is then tested on real-time pitch competitions, by analysing data from technology start-up entrepreneurs, psychologist evaluators, and investors. The model is grounded in dual-processing theory and signalling theory. It is hypothesised that investors base their evaluations on their intuitive judgment of the entrepreneurs. Entrepreneurs’ competence, coachability, passion, preparedness, and leadership are shown to be associated with investors’ evaluations of funding potential.

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Reviewing equity investors’ funding criteria: a comprehensive classification and research agenda

Cited by 31 publications

References 11 publications

Firm selection for government venture capital funding to youth tech-based startups

Firm selection for government venture capital funding to youth tech-based startups

The Role of Entrepreneurs’ Perceived Competence and Cooperativeness in Early-Stage Financing

The Effect of Entrepreneur Attributes on Investment Evaluations in Pitch Competitions

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