Decision criteria of risk capital investors in the later-stage financing of growth ventures

• Applicant: Professor Dr. Jörn Block
• Subject Area: Accounting and Finance
• Term: from 2018 to 2021
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 400567894

Our research project deals with the decision-making behavior of risk capital investors when investing in growth ventures. Growth ventures are young companies, which are already selling their first product on the market, show first revenues and are already employing multiple employees. Often, these growth ventures require external capital to fund their growth and internationalization initiatives. Risk capital investors such as venture capital funds are facing the challenge of deciding to invest in the venture in the presence of high uncertainty about the future success of the venture. Due to the importance of growth ventures for economic growth, employment and innovation, it is very important to understand and describe the decision-making behavior of risk capital investors when investing in growth ventures.The main goal of the research project is to understand the decision-making behavior of investors using conjoint experiments. The research project addresses three aspects of the decision-making behavior of risk capital investors when investing in growth ventures.(1) The first objective is to investigate, which criteria risk capital investors apply when taking a decision to invest in growth ventures (e.g., management team, financial figures of the venture or characteristics and reputation of current investors), what the relative importance of each of these criteria is and how they interact with each other.(2) The second objective is to find out if and to what degree characteristics of the decision maker have an influence on his/her decision-making behavior. Here, our research focusses on human capital characteristics (e.g., educational background or prior experience as an investor or entrepreneur).(3) Furthermore, we investigate the influence of characteristics of the investor company on the decision-making behavior. Here, we try to research if and to what degree for example the resource endowment (e.g., small number of employees) or investment goals (e.g., strategic goals in the case of corporate ventures capital funds) of the investor have an influence on their decision-making behavior.Our project not only contributes to entrepreneurship research, but also has the potential to have an impact on entrepreneurship practice. The results from our research can, for example, help growth ventures to acquire later-stage financing for their venture.

• DFG Programme: Research Grants