The Evolution of Entrepreneurs` Fund-Raising Intentions

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Juli 2008



Marc Grünhagen examines the evolution of fund-raising struggles in eleven in-depth case studies of seed and early stage ventures. The findings suggest two core recommendations for supporting growth-oriented fund-raising processes: a) to build legitimizing potential and b) to ensure sufficient financial scope for flexible adaptations throughout the financing struggle.


Epistemological concept, New ventures: definition, financing needs, and legitimacy, Financiers' legitimacy demands and the evolution of entrepreneurs' fund raising intentions, Multiple case studies of fund-raising processes in new ventures, Conclusions and implications for research and practice


Dr. Marc Grünhagen ist wissenschaftlicher Mitarbeiter von Prof. Dr. Lambert T. Koch am Lehrstuhl für Unternehmensgründung und Wirtschaftsentwicklung an der Universität Wuppertal.


4. 2. 2. 3. Stability and inter-subjectivity of financiers evaluation criteria (S. 140-141)

To begin with it should be noted that - in accordance with chapter two above - it is not holistic evaluation criteria themselves which make investment and credit decisions, but rather financial actors like angel investors or bankers employing evaluation criteria in their decision-making. This has been pointed out, for example, by Tyebjee & Bruno (1984, 1063) for the case of pre-investment screening criteria in the venture capital domain.

The authors use a modelling concept in which evaluation criteria are treated as antecedents to the venture capital managers risk-and-return perception of a suggested investment, this perception in turn is assumed to influence final investment decisions. From a conceptual perspective, pre-investment screening criteria would be less suitable as legitimacy restrictions on fund-raising processes, if, say, different venture capitalists employed completely heterogeneous assessment criteria which changed frequently and which were applied by individual financier actors in a totally subjective manner. Therefore, the issue of in how far reasonably coherent and stable evaluation criteria may exist within respective financier communities also needs to be addressed (i.e. in the banking, venture capital, or angel investor domain etc.).

From an institutionalists viewpoint, this may in fact be a question of the extent of institutionalization of such criteria. Typically institutionalization is characterized by some kind of sanctioned regulative-normative element and degree of shared understanding which features durability (cf. Hwang & Scott, 2005, 204, Scott, 2001, 48 and 51p., for a characterization of institutions and their functions see also Geue, 1997, 79pp.).

To identify institutionalization, the seminal paper by Zucker (1987, 448) considers elements from the institutional environment (e
.g. passing of law or professionalism) as well as possible consequences of institutionalization as possible indicators. Mirrored against such indicators, on the one hand there may be signs of institutionalization in financiers evaluation criteria. For example, elements of professionalism in some sub-domains of the financial environment may indicate institutionalization (see below), or isomorphism may be a visible consequence of it.

An example of the latter may be that new ventures will typically have to provide business plans, because they are demanded by formal financiers such as venture capitalists or bankers (cf. above and also Picot et al., 1989 and Castrogiovanni, 1996 arguing that preparing business plans may often follow typified demands of external stakeholders).96 However, on the other hand, institutional contra-indications may also be eminent in the application of pre-investment evaluation criteria. For the above features of stability and inter-subjectivity of evaluation criteria as legitimacy restrictions, both elements pro as well as possible reservations will be addressed.

Temporal stability of evaluation criteria

Basically, the long-term stability of any societal evaluation may be doubted because it will have to rely on fallible socially constructed criteria (cf. Koch, 2003 and Hwang & Scott, 2005, 204 on institutional durability and change). For the case of financiers of entrepreneurial ventures, Brouwer (2002, 102, also cf. Rovenpor, 2004, 54) has noted that investors decisions also suffer from fallibility and underlying evaluation criteria may be adjusted in face of failing investment projects. In an analysis of the German venture capital industry after the high technology downturn, interviews with German entrepreneurs found that venture capitalists evaluations had become more severe after the downturn as compared to the time of the e-commerce and tech boom (Kollmann & Kuckertz, 2004, 54p., also cf. Rovenpor, 2004).


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EAN: 9783834997975
Untertitel: A Multiple Case Study of Financing Processes in New Ventures. 2008. Auflage. 33 schwarz-weiße Abbildungen, Bibliographie. Sprache: Englisch. Dateigröße in MByte: 2.
Verlag: Gabler Verlag
Erscheinungsdatum: Juli 2008
Seitenanzahl: xv368
Format: pdf eBook
Kopierschutz: Adobe DRM
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