People investing in people. The overview on investment methods in technological start-ups at different stages of growth
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Published:
Sep 4, 2019
Keywords:
start-up, founder, technology-based firm, investment sources, financing sources
Main Article Content
Abstract
The purpose of this paper is to explore different funding sources for young technology-based companies at different stages of their development, taking into consideration their characteristics. The study uses data from an extensive literature review on the start-up literature and a desk research analysis. The first part of the article focuses on the explanation of the concept of start-up with an emphasis on internal and external risks it can bear for a potential investor. The middle part of the article offers an overview on various division concepts into phases of a start-up. The final part explains characteristics of different kinds of investors in order to match them with specific phases of growth. The author’s findings reveal that the new technology-based firms demonstrate different financing patterns at different stages of development. The article may serve as an interesting overview for start-ups planning their development path as it attempts to reconcile different points of view. However, being based only on existing literature sources, further research is necessary for more profound conclusions.
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How to Cite
Belka, M. A. (2019). People investing in people. The overview on investment methods in technological start-ups at different stages of growth. Journal of Management and Financial Sciences, (37), 75–97. https://doi.org/10.33119/JMFS.2019.37.5
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Articles
References
Books
1. Blank, S., Dorf, B. (2012). The Startup Owner’s Manual: The Step-By-Step Guide for Building
a Great Company. K & S Ranch.
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New Jersey, USA: Hoboken.
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4. Thiel, P., Masters, B. (2014). Zero to One: Notes on Start-ups, or How to Build the Future. New
York.
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1. Alstete, J. W. (2015). Aspects of entrepreneurial success. Journal of Small Business and Enterprise
Development, Vol. 15 Iss. 3, pp. 584–594.
2. Atherton, A. (2010). Cases of start-up financing: An analysis of new venture capitalisation
structures and patterns. International Journal of Entrepreneurial Behavior & Research, Vol. 18,
Iss. 1, pp.28–47.
3. Bartkus, J. R., Hassan, M. K. (2009). Specialization versus diversification in venture capital
investing. Journal of Financial Regulation and Compliance, Vol. 17, Iss. 2, pp. 134–143.
4. Beauchamp, M, Kowalczyk, A., Skala, A. (2017). Polskie Startupy. Raport 2017. Warszawa:
Fundacja Startup Poland.
5. Blazenko, W., Pavlov, A. D., Eddy-Sumeke, F. (2012). New ventures start-up and technological
innovation. International Journal of Managerial Finance, Vol. 8, Iss. 1, pp. 4–35.
6. Christensen, C. M., Raynor, M. E. (2003). The Innovator’s Solution, Creating and Sustaining
Successful Growth. Boston, MA: Harvard Business School Press.
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a match? Management Research Review, Vol. 35, Iss. 2, pp. 106–120.
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expeirences in Poland. Social Enterprise Journal, Vol. 6, Iss. 3, pp. 194–209.
9. D’Aveni, R. A., Gunther, R. E. (1994). Hypercompetition: Managing the Dynamics of Strategic
Maneuvering. New York, NY: The Free Press.
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recommendation. International Journal of Entrepreneurial Behaviour and Research, Vol. 12,
Iss. 3, pp. 114–143.
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News, Vol. 15 Iss. 4, pp. 28–39.
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Journal of Business Strategy, Vol. 6 Iss. 2, pp. 85–91.
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Vol. 3, Iss. 2, pp. 180–198.
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Journal of Business Strategy, Vol. 34, Iss. 4, pp. 20–30.
15. Kirkley, W. W. (2016). Creating ventures: decision factors in new venture creation. Asia Pacific
Journal of Innovation and Entrepreneurship, Vol. 10, Iss. 1, pp. 151–167.
16. Klonowski, D. (2006). Venture capital as a method of financing enterprise development in
Central
and Eastern Europe. International Journal of Emerging Markets, Vol. 1, Iss. 2, pp. 165–175.
17. March, J. G., Nerkar, A. (1991). Exploration and Exploitation in organisational learning.
Organization Science, Vol. 2 No. 1, pp. 71–87.
18. Marigono, A., Zolin, R., Chang, A. (2017). A typology of social venture business model configurations.
International Journal of Entrepreneurial Behaviour and Research.
19. Mayer, R. C., Davis, J., Schoorman, D. (1995). Social entrepreneurship: the case for definition.
Stanford Social Innovation Review, Spring.
20. McGowan, P., Everett, K. (2012). Venture capital funds – recent European developments.
Journal of Investment Compliance, Vol. 13, Iss. 2, pp. 57–59.
21. McNally, K. (1995). Corporate venture capital: the financing of technology business. International
Journal of Entrepreneurial Behaviour & Research, Vol. 1, Iss. 3, pp. 9–43.
22. Neill, S., Metcalf, L. E., York, J. L. (2017). Distinguishing entrepreneurial approaches to opportunity
perception. International Journal of Entrepreneurial Behaviour & Research, Vol. 23,
Iss. 2, pp. 296–316.
23. Panda, S., Dash, S. (2013). Trust and reputation in new ventures: insights from an Indian
venture capital firm. Development and Learning in Organisations: An International Journal,
Vol. 27, Iss. 4, pp. 9–11.
24. Papadimitriou, S., Mourdoukoutas, P. (2002). Bridging the start-up quity financing gap: three
policy models. European Business Review, Vol. 14, Iss. 2, pp. 104–110.
25. Robbie, K., Murray, G. (1992). Venture Capital in the UK. International Journal of Bank Marketing,
Vol. 10, Iss. 5, pp. 32–40.
26. Skarzynski, P., Schaedler, D. (2010). A new model for unlocking the value of entrepreneurial
businesses. Business Strategy Series, Vol. 11, Iss. 5, pp. 271–276.
27. Talaia, M., Pisoni, A., Onetti, A. (2016). Factors influencing the fund-raising process for innovative
new ventures: an empirical study. Journal of Small Business and Enterprise Development,
Vol. 23, Iss. 2, pp. 365–378.
28. Taylor, L. (1989). Raising Venture Capital. Journal of Business Strategy, Vol. 10, Iss. 4, pp.61–64.
29. The Secret to Entrepreneurship: business and pleasure: Exploring the passion for work and
for running a business. Strategic Direction, Vol. 31, Iss. 7, pp. 11–12.
30. Thorgren, S., Nordstrom, C. and Wincent, J. (2014). Hybrid entrepreneurship: the importance
of passion. Baltic Journal of Management, Vol. 9, No. 3, pp. 314–329.
31. Ziółkowska, M. (2018). Determinants of choosing a business model in small and medium-
-sized enterprises. Journal of Management and Financial Sciences, Vol. XI, Iss. 34, pp. 93–101.
Reports
1. European Commission (2017). European Commission Final Report on Efectiveness of tax
incentives for venture capital and business angels to foster the investment of SMEs and start-ups,
TAXUD/2015. DE/330. Retrieved from: https://ec.europa.eu/taxation_customs/sites/taxation/
files/final_report_2017_taxud_venture-capital_business-angels.pdf [accessed: 20.01.2019].
2. European Parliament’s Committee on Employment and Social Affairs, Brussels, European
Parliament (2010). The Lisbon Strategy 2000–2010: An Analysis and evaluation of the methods
used and results achieved, Brussels. Retrieved from: http://www.europarl.europa.eu/document/
activities/cont/201107/20110718ATT24270/20110718ATT24270EN.pdf [accessed: 20.01.2019].
3. Institute for the Future for the University of Pheonix Research Institute (2011). Future Work
Skills 2020. Retrieved from: http://www.iftf.org/uploads/media/SR-1382A_UPRI_future_
work_skills_sm.pdf [accessed: 20.01.2019].
Internet based sources:
1. Cohan, P. (2016). The Four Stages of Start-up Growth (and How to Manage Them). Retrieved
from: https://www.inc.com/peter-cohan/the-four-stages-of-startup-growth-and-how-tomanage-
them.html [accessed: 20.01.2019].
2. Dibner, G. (2018). There are only three startup stages. Retrieved from: https://medium.com/
angularventures/there-are-only-three-stages-for-startups-b8783d6b0f1 [accessed: 20.01.2019].
3. Enterprise Singapore: SME Portal (2015). Singapore. Retrieved from: https://www.smeportal.
sg/content/smeportal/en/moneymatters/assistance-for-startups/tax-exemption-scheme-for-
-new-startup-companies.html [accessed: 05.04.2019].
4. Lee, A. (2013). Welcome to the Unicorn Club: Learning from Billion-Dollar Start-ups. Retrieved
from: https://techcrunch.com/2013/11/02/welcome-to-the-unicorn-club/?guccounter=1
[accessed: 29.01.2019].
5. Magistretti, B., Hensel, A. (2018). VCs invested the most capital in 2017 since the dotcom
era. Retrieved from: https://venturebeat.com/2018/01/08/vcs-invested-the-most-capital-in-
2017‑since-the-dotcom-era/ [accessed: 29.01.2019].
6. Meisler, L., Cannon, C. (2018). U. S. Venture Capital Swells and Spreads. Retrieved from: https://
www.bloomberg.com/graphics/2018‑venture-capital-deals/ [accessed: 29.01.2019].
7. Myers, W., Do really 9 out of 10 start-ups fail? Retrieved from: https://www.startupfinancialmodel.
com/startuptips/do-9‑out-of-10‑startups-really-fail [accessed: 29.01.2019].
8. Office of Advocacy (2012). Do economic or industry factors affect business survival?, Retrieved
from: https://www.sba.gov/sites/default/files/Business-Survival.pdf [accessed: 20.01.2019].
9. Olsen, D. (2017). A record-setting year: 2017 VC activity in 3 charts. Retrieved from: https://
pitchbook.com/news/articles/a-record-setting-year-2017‑vc-activity-in-3‑charts [accessed:
20.01.2019].
10. Petch, N. (2016). The Five Stages of Your Business Lifecycle: Which Phase Are You In? Retrieved
from: https://www.entrepreneur.com/article/271290 [accessed: 20.01.2019].
11. Segal, C. The 6 Stages of a Start-up: Where are You?, Retrieved from: https://www.coxblue.
com/the-6‑stages-of-a-startup-where-are-you/ [accessed: 20.01.2019].
12. Wiltbank, R. (2012). Angel Investors Do Make Mone, Data Shows 2.5x Returns Overall. Retrieved
from: https://techcrunch.com/2012/10/13/angel-investors-make-2-5x-returns-overall/
[accessed: 20.01.2019].
13. Wolfson, R. (2018). Maltese Parliament Passes Laws Set Regulatory Framework For Blockchain,
Cryptocurrency and DLT. Retrieved from: https://www.forbes.com/sites/rachelwolfson/
2018/07/05/maltese-parliament-passes-laws-that-set-regulatory-framework-for-blockchaincryptocurrency-
and-dlt/#7e65e42f49ed [accessed: 5.04.2019].
14. Zahorsky, D. (2019). The 7 Stages of Starting and Running a Business. Retrieved from: https://
www.thebalancesmb.com/find-your-business-life-cycle-2951237 [accessed: 20.01.2019].
Webinars
1. Sutton, R. I. (2014). Scaling Up Without Screwing Up, Stanford University. Retrieved from:
https://www.youtube.com/watch?v=OnQBnvYdXgI
2. Gross, B. (2015). The single biggest reason why start-ups succeed”, TED Talk. Retrieved from:
https://www.ted.com/talks/bill_gross_the_single_biggest_reason_why_startups_succeed?language=
pl
1. Blank, S., Dorf, B. (2012). The Startup Owner’s Manual: The Step-By-Step Guide for Building
a Great Company. K & S Ranch.
2. Feld, B. (2012). Startup Communities: Building an Entrepreneurial Ecosystem in Your City.
New Jersey, USA: Hoboken.
3. Ries E. (2011). The Lean Start-up. New York.
4. Thiel, P., Masters, B. (2014). Zero to One: Notes on Start-ups, or How to Build the Future. New
York.
Articles
1. Alstete, J. W. (2015). Aspects of entrepreneurial success. Journal of Small Business and Enterprise
Development, Vol. 15 Iss. 3, pp. 584–594.
2. Atherton, A. (2010). Cases of start-up financing: An analysis of new venture capitalisation
structures and patterns. International Journal of Entrepreneurial Behavior & Research, Vol. 18,
Iss. 1, pp.28–47.
3. Bartkus, J. R., Hassan, M. K. (2009). Specialization versus diversification in venture capital
investing. Journal of Financial Regulation and Compliance, Vol. 17, Iss. 2, pp. 134–143.
4. Beauchamp, M, Kowalczyk, A., Skala, A. (2017). Polskie Startupy. Raport 2017. Warszawa:
Fundacja Startup Poland.
5. Blazenko, W., Pavlov, A. D., Eddy-Sumeke, F. (2012). New ventures start-up and technological
innovation. International Journal of Managerial Finance, Vol. 8, Iss. 1, pp. 4–35.
6. Christensen, C. M., Raynor, M. E. (2003). The Innovator’s Solution, Creating and Sustaining
Successful Growth. Boston, MA: Harvard Business School Press.
7. Coleman, S., Robb, A. (2012). Capital structure theory and new technology firms: is there
a match? Management Research Review, Vol. 35, Iss. 2, pp. 106–120.
8. Curtis, T., Herbst, J., Gumkovska, M. (2010). The social economy of trust: social entrepreneurship
expeirences in Poland. Social Enterprise Journal, Vol. 6, Iss. 3, pp. 194–209.
9. D’Aveni, R. A., Gunther, R. E. (1994). Hypercompetition: Managing the Dynamics of Strategic
Maneuvering. New York, NY: The Free Press.
10. Das, T. K., He, I. Y., (2006). Entrepreneurial firms in search of established partners: review and
recommendation. International Journal of Entrepreneurial Behaviour and Research, Vol. 12,
Iss. 3, pp. 114–143.
11. Fried, V. H. and Hisrich, R. D. (1992). Venture Capital and the Investors. Management Research
News, Vol. 15 Iss. 4, pp. 28–39.
12. George, R., MacMillan, I. C. (1995). Corporate Venturing: Venture Management Challenges.
Journal of Business Strategy, Vol. 6 Iss. 2, pp. 85–91.
13. Iñaki, P. (2002). Intellectual capital and business start-up success. Journal of Intellectual Capital,
Vol. 3, Iss. 2, pp. 180–198.
14. King, B. L. (2013). Succeeding in a hypercompetitive world: VC advice for smaller companies.
Journal of Business Strategy, Vol. 34, Iss. 4, pp. 20–30.
15. Kirkley, W. W. (2016). Creating ventures: decision factors in new venture creation. Asia Pacific
Journal of Innovation and Entrepreneurship, Vol. 10, Iss. 1, pp. 151–167.
16. Klonowski, D. (2006). Venture capital as a method of financing enterprise development in
Central
and Eastern Europe. International Journal of Emerging Markets, Vol. 1, Iss. 2, pp. 165–175.
17. March, J. G., Nerkar, A. (1991). Exploration and Exploitation in organisational learning.
Organization Science, Vol. 2 No. 1, pp. 71–87.
18. Marigono, A., Zolin, R., Chang, A. (2017). A typology of social venture business model configurations.
International Journal of Entrepreneurial Behaviour and Research.
19. Mayer, R. C., Davis, J., Schoorman, D. (1995). Social entrepreneurship: the case for definition.
Stanford Social Innovation Review, Spring.
20. McGowan, P., Everett, K. (2012). Venture capital funds – recent European developments.
Journal of Investment Compliance, Vol. 13, Iss. 2, pp. 57–59.
21. McNally, K. (1995). Corporate venture capital: the financing of technology business. International
Journal of Entrepreneurial Behaviour & Research, Vol. 1, Iss. 3, pp. 9–43.
22. Neill, S., Metcalf, L. E., York, J. L. (2017). Distinguishing entrepreneurial approaches to opportunity
perception. International Journal of Entrepreneurial Behaviour & Research, Vol. 23,
Iss. 2, pp. 296–316.
23. Panda, S., Dash, S. (2013). Trust and reputation in new ventures: insights from an Indian
venture capital firm. Development and Learning in Organisations: An International Journal,
Vol. 27, Iss. 4, pp. 9–11.
24. Papadimitriou, S., Mourdoukoutas, P. (2002). Bridging the start-up quity financing gap: three
policy models. European Business Review, Vol. 14, Iss. 2, pp. 104–110.
25. Robbie, K., Murray, G. (1992). Venture Capital in the UK. International Journal of Bank Marketing,
Vol. 10, Iss. 5, pp. 32–40.
26. Skarzynski, P., Schaedler, D. (2010). A new model for unlocking the value of entrepreneurial
businesses. Business Strategy Series, Vol. 11, Iss. 5, pp. 271–276.
27. Talaia, M., Pisoni, A., Onetti, A. (2016). Factors influencing the fund-raising process for innovative
new ventures: an empirical study. Journal of Small Business and Enterprise Development,
Vol. 23, Iss. 2, pp. 365–378.
28. Taylor, L. (1989). Raising Venture Capital. Journal of Business Strategy, Vol. 10, Iss. 4, pp.61–64.
29. The Secret to Entrepreneurship: business and pleasure: Exploring the passion for work and
for running a business. Strategic Direction, Vol. 31, Iss. 7, pp. 11–12.
30. Thorgren, S., Nordstrom, C. and Wincent, J. (2014). Hybrid entrepreneurship: the importance
of passion. Baltic Journal of Management, Vol. 9, No. 3, pp. 314–329.
31. Ziółkowska, M. (2018). Determinants of choosing a business model in small and medium-
-sized enterprises. Journal of Management and Financial Sciences, Vol. XI, Iss. 34, pp. 93–101.
Reports
1. European Commission (2017). European Commission Final Report on Efectiveness of tax
incentives for venture capital and business angels to foster the investment of SMEs and start-ups,
TAXUD/2015. DE/330. Retrieved from: https://ec.europa.eu/taxation_customs/sites/taxation/
files/final_report_2017_taxud_venture-capital_business-angels.pdf [accessed: 20.01.2019].
2. European Parliament’s Committee on Employment and Social Affairs, Brussels, European
Parliament (2010). The Lisbon Strategy 2000–2010: An Analysis and evaluation of the methods
used and results achieved, Brussels. Retrieved from: http://www.europarl.europa.eu/document/
activities/cont/201107/20110718ATT24270/20110718ATT24270EN.pdf [accessed: 20.01.2019].
3. Institute for the Future for the University of Pheonix Research Institute (2011). Future Work
Skills 2020. Retrieved from: http://www.iftf.org/uploads/media/SR-1382A_UPRI_future_
work_skills_sm.pdf [accessed: 20.01.2019].
Internet based sources:
1. Cohan, P. (2016). The Four Stages of Start-up Growth (and How to Manage Them). Retrieved
from: https://www.inc.com/peter-cohan/the-four-stages-of-startup-growth-and-how-tomanage-
them.html [accessed: 20.01.2019].
2. Dibner, G. (2018). There are only three startup stages. Retrieved from: https://medium.com/
angularventures/there-are-only-three-stages-for-startups-b8783d6b0f1 [accessed: 20.01.2019].
3. Enterprise Singapore: SME Portal (2015). Singapore. Retrieved from: https://www.smeportal.
sg/content/smeportal/en/moneymatters/assistance-for-startups/tax-exemption-scheme-for-
-new-startup-companies.html [accessed: 05.04.2019].
4. Lee, A. (2013). Welcome to the Unicorn Club: Learning from Billion-Dollar Start-ups. Retrieved
from: https://techcrunch.com/2013/11/02/welcome-to-the-unicorn-club/?guccounter=1
[accessed: 29.01.2019].
5. Magistretti, B., Hensel, A. (2018). VCs invested the most capital in 2017 since the dotcom
era. Retrieved from: https://venturebeat.com/2018/01/08/vcs-invested-the-most-capital-in-
2017‑since-the-dotcom-era/ [accessed: 29.01.2019].
6. Meisler, L., Cannon, C. (2018). U. S. Venture Capital Swells and Spreads. Retrieved from: https://
www.bloomberg.com/graphics/2018‑venture-capital-deals/ [accessed: 29.01.2019].
7. Myers, W., Do really 9 out of 10 start-ups fail? Retrieved from: https://www.startupfinancialmodel.
com/startuptips/do-9‑out-of-10‑startups-really-fail [accessed: 29.01.2019].
8. Office of Advocacy (2012). Do economic or industry factors affect business survival?, Retrieved
from: https://www.sba.gov/sites/default/files/Business-Survival.pdf [accessed: 20.01.2019].
9. Olsen, D. (2017). A record-setting year: 2017 VC activity in 3 charts. Retrieved from: https://
pitchbook.com/news/articles/a-record-setting-year-2017‑vc-activity-in-3‑charts [accessed:
20.01.2019].
10. Petch, N. (2016). The Five Stages of Your Business Lifecycle: Which Phase Are You In? Retrieved
from: https://www.entrepreneur.com/article/271290 [accessed: 20.01.2019].
11. Segal, C. The 6 Stages of a Start-up: Where are You?, Retrieved from: https://www.coxblue.
com/the-6‑stages-of-a-startup-where-are-you/ [accessed: 20.01.2019].
12. Wiltbank, R. (2012). Angel Investors Do Make Mone, Data Shows 2.5x Returns Overall. Retrieved
from: https://techcrunch.com/2012/10/13/angel-investors-make-2-5x-returns-overall/
[accessed: 20.01.2019].
13. Wolfson, R. (2018). Maltese Parliament Passes Laws Set Regulatory Framework For Blockchain,
Cryptocurrency and DLT. Retrieved from: https://www.forbes.com/sites/rachelwolfson/
2018/07/05/maltese-parliament-passes-laws-that-set-regulatory-framework-for-blockchaincryptocurrency-
and-dlt/#7e65e42f49ed [accessed: 5.04.2019].
14. Zahorsky, D. (2019). The 7 Stages of Starting and Running a Business. Retrieved from: https://
www.thebalancesmb.com/find-your-business-life-cycle-2951237 [accessed: 20.01.2019].
Webinars
1. Sutton, R. I. (2014). Scaling Up Without Screwing Up, Stanford University. Retrieved from:
https://www.youtube.com/watch?v=OnQBnvYdXgI
2. Gross, B. (2015). The single biggest reason why start-ups succeed”, TED Talk. Retrieved from:
https://www.ted.com/talks/bill_gross_the_single_biggest_reason_why_startups_succeed?language=
pl