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What qualities do government-owned venture capital investors seek in a new venture? A comparison of investment criteria across pre-seed, seed, and expansion stage startups

Molnár, Endre Mihály and Jáki, Erika (2020) What qualities do government-owned venture capital investors seek in a new venture? A comparison of investment criteria across pre-seed, seed, and expansion stage startups. Vezetéstudomány - Budapest Management Review, 51 (11). pp. 64-76. DOI https://doi.org/10.14267/VEZTUD.2020.11.06

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Official URL: https://doi.org/10.14267/VEZTUD.2020.11.06


Abstract

Private venture capital (VC) investors usually do not invest in early life-cycle stage startups such as seed and pre-seed companies, since investment size typically doesn’t reach investment thresholds. The entry of governments with fund managers to venture capital markets presents seed and pre-seed companies with the opportunity to receive funding. This paper examines the main investment preferences of Hungarian government-owned venture capital investors regarding pre-seed, seed, and expansion stage startups. Verbal protocol analysis enabled examination of the screening process in real-time in all three life-cycle stages. It is found that governmental VC funds mostly value financial indicators followed by market-related qualities while private VCs value these characteristics in alternate formation. However, in the pre-seed stage, the financial acumen and capabilities of management teams form the main criteria in similarity to angel investors. Governmental VCs also greatly seek innovational value in target firms.

Item Type:Article
Uncontrolled Keywords:venture capital, governmental venture capital, seed investment, investment criteria, startup financing, business plan
Subjects:Finance
Management, business policy, business strategy
Projects:EFOP - 3.6.3 - VEKOP-16-2017-00007 - "From Talent to Young Researcher project aimed at activities supporting the research career model in higher education”
DOI:https://doi.org/10.14267/VEZTUD.2020.11.06
ID Code:6065
Deposited By: Ádám Hoffmann
Deposited On:09 Nov 2020 16:38
Last Modified:09 Nov 2020 16:38

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