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Key Elements that Affect Selection of the Venture Capital by a Startup  

Kim, Jinsoo (Business School, Hanyang University)
Bae, Tae-Jun (Department of Entrepreneurship graduate school, Hanyang University)
Lee, Sang-Myung (Business School, Hanyang University)
Publication Information
Asia-Pacific Journal of Business Venturing and Entrepreneurship / v.16, no.2, 2021 , pp. 1-17 More about this Journal
Abstract
Existing research on the investment relationship between venture capital and start-up companies has mainly focused on choosing a startup from the perspective of venture capital, an investor. However, as competition among venture capital has increased recently, excellent start-ups with proven technology are choosing venture capital in reversely. This study investigated key elements that affect the selection of the venture capital by a startup. To this end, we looked at which venture capital company was selected as the final investor for startups that have received investment proposals from multiple venture capitals at the same time. Six early start-ups(pre-series A/Series A) and five mid-term (Series B/C) start-ups were interviewed to focus on the influence of the three elements regarding venture capital - 1) venture capital reputation, 2) relationship between cofounders and investors, and 3) value adding service provided by venture capital - on choice. As a result of the research, the investment portfolio among the reputations of venture capital was a very important element in selecting venture capital. However, it has been shown that the age and asset under management of venture capital are not important. Relationships have emerged as a very important element. Finally, as for venture capital's value-adding services, start-ups in this study did not consider it important. In particular, consulting and monitoring by venture capital has been found to be a burdening attribute for startups. This study suggests implications that can increase the probability of successful investment by venture capital in the investment market where investment competition is fierce, and enhance mutual understanding between venture capital and startups.
Keywords
Venture capital; startup; venture capitalist; investment portfolio; relationship; value adding service; key elements for selection;
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