Understanding early-stage VC decision-making

: the role of the entrepreneur’s experience in obtaining equity financing within the German entrepreneurial ecosystem

Abstract

In recent decades, there has been a significant rise in disruptive and innovative technologicaladvancements that hold great promise for both the economy and society. Startups have playeda significant role in this trend, becoming a crucial part of the dynamic German entrepreneurialecosystem. Scholars agree that these ventures rely heavily on access to venture capital to fueltheir operations and achieve their full potential. However, despite the crucial role of venturecapital for start-ups, research on early-stage VC decision-making is still rare due to thesubjective nature of the topic. Previous studies have mainly relied on quantitative methods,leaving ample room for qualitative research to generate new theories on the topic usinggrounded theory. Hence, this study employs the Gioia et al. (2013) approach on groundedtheory to establish a model explaining the decision-making of early-stage funds in Germanyand the rather unexplored role of the entrepreneur’s previous experience.The grounded theory model created based on the qualitative data proposes four aggregatedimensions which influence early-stage VC decision-making in Germany: 1) Assessment ofMacroenvironment/Alignment with VC Interests, 2) Individual Approach to Venture Target, 3)Know-How of Founding Team, 4) Financial Viability and Venture Potential. The findingsindicate that the entrepreneurs’ previous experience can serve as strong positive signaling in aVCs decision-making process, however not as the sole driver of an investment decision.

Date of Award	30 Jun 2023
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Rand Gerges-Yammine (Supervisor)