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Article
Publication date: 21 May 2018

Alessia Pisoni and Alberto Onetti

The purpose of this paper is to present an overview of trends toward start-up exits. Exits represent the “end phase” of the start-up process, at least for the founders and the…

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Abstract

Purpose

The purpose of this paper is to present an overview of trends toward start-up exits. Exits represent the “end phase” of the start-up process, at least for the founders and the early investors. For high-growth venture-capital-backed companies, exits are often considered the ultimate goal of building a profitable venture. These ventures are intended from the beginning to harvest the financial value created by the business at some point in the future, and return capital to early investors.

Design/methodology/approach

The authors tracked 5,744 merger and acquisition transactions that have occurred between European and US tech start-ups since 2012. Data are drawn from CrunchBase, the most comprehensive database of high-tech companies and investors with information on the companies and investors around the world. The authors then compared the trends of acquisitions between European and US companies.

Findings

Results show that US companies are far more inclined to make acquisitions than European ones. Acquirers of start-ups, both from Europe and the US, prefer to buy local companies. However, recently, US companies have started to show more interest in European start-ups. Thus, signaling that the European start-up ecosystem is growing and becoming more attractive for US buyers. Furthermore, results show that start-up exits typically happen within a few years after a company’s establishment.

Research limitations/implications

The research does not take into consideration the price of the transaction, or the amount of capital invested by venture capitalists in the high-tech start-ups that have been acquired. Further research should address this specific problem by helping European start-ups understand how to plan the exit phase within few years from establishment.

Practical implications

The results have important implications both for entrepreneurs/managers and policymakers. Early exit appears to be a global trend among start-ups. This suggests that the exit phase should be properly planned to happen in the very early stage of the start-up process. On the other hand, the research also shows that there is still a gap to be filled in the European start-up ecosystems’ ability to produce exits and create new large innovative companies (the so-called “unicorns”).

Originality/value

To date, there has been a little research about exits for young high-tech ventures. This paper will attempt to shed new light on this so far under-explored issue by specifically analyzing exits as financial strategy for investors and entrepreneurs.

Details

Journal of Business Strategy, vol. 39 no. 3
Type: Research Article
ISSN: 0275-6668

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Article
Publication date: 16 May 2016

Marco Talaia, Alessia Pisoni and Alberto Onetti

– The purpose of this paper is to identify the factors that influence the fund raising ability of innovative new ventures/startups.

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Abstract

Purpose

The purpose of this paper is to identify the factors that influence the fund raising ability of innovative new ventures/startups.

Design/methodology/approach

The authors investigate a data set composed of 108 Italian innovative new ventures. Specifically, the authors run a Tobit regression model linking the amount of equity raised by the company to the human capital of the company. The authors focussed the analysis on the Chief Executive Officer (CEO) of the new company, who usually is a founder and, in the early stages, the most charismatic figure.

Findings

The analysis shows a significant relationship between the ability of a startup to raise funds and the level of education of the CEO. The findings suggest that this causal relation is even stronger as the CEO holds an MBA.

Research limitations/implications

The results of our empirical study provide further insights about the characteristics of the CEO that mostly impact on fund raising ability of the new ventures. The results are limited to startups founded by Italian entrepreneurs. A cross-country comparison will represent the natural prosecution of our research.

Practical implications

The study provides important implications for researchers and practitioners who are interested in understanding the fundamentals of the fund raising process for innovative startups. Moreover, these findings may also be helpful for policy makers in better understanding the factors potentially influencing the Italian startup ecosystem.

Originality/value

The paper sheds light on the factors affecting the fund raising process of innovative new ventures in the early stage of the company’s life cycle. Specifically, it is one of the few study focussing on the profile/background of the CEO in early-stage companies.

Details

Journal of Small Business and Enterprise Development, vol. 23 no. 2
Type: Research Article
ISSN: 1462-6004

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