Start-ups are emerging, non-conventional enterprises that enter established markets with radically different products, displace incumbents, create new markets, and promote economic growth through innovation. Start-ups are often faced with many challenges that may threaten their survival, which can often be overcome by securing steady financial support. Start-ups are high-risk enterprises that are unattractive to conventional financiers, but absolutely suited to private equity (PE) and venture capital (VC) investors who seek rewards and are therefore willing to accept risk. The success stories of global digital platform start-ups have attracted PE investors in particular. When investing in a digital platform start-up in Germany, what criteria do PE and VC investors look for? How should entrepreneurs prepare for VC funding? What strategies should they use? The authors examine these questions in this book and provide a comprehensive analysis of the German start-up, digital platform, PE, and VC ecosystems. The book exposes entrepreneurs, investors, mergers and acquisitions experts, regulators and policy-makers to the market's workings and pain points so that they can help create a German start-up ecosystem that is as functional as the other organized industries.
Author(s): Cordelia Friesendorf, Navid J. Mir Haschemi
Series: Business Guides on the Go
Publisher: Springer
Year: 2023
Language: English
Pages: 115
City: Cham
Book Abstract
Contents
About the Authors
Chapter 1: The Imperative of Private Equity in Start-up Financing in Germany
1.1 No Equity, No Innovation
1.2 The Role of Venture Capital
1.3 Research Gap in Start-up Financing
1.4 Objectives of the Book
1.5 Methodological Approach
1.6 Plan of the Book
References
Chapter 2: The Nature and Characteristics of Start-ups
2.1 Start-ups Versus Conventional Firms
2.2 Start-up Characteristics
2.3 Financing Start-ups
2.4 Life Cycle and Financing Phases of Start-ups
2.4.1 Phase I: Early
2.4.1.1 Pre-seed
2.4.1.2 Seed
2.4.1.3 Start-up
2.4.2 Phase II: Expansion
2.4.3 Phase III: Late
2.4.4 Exit
2.5 Challenges Start-ups Face in Germany
2.6 Germany´s Start-up Financing Environment
2.7 Germany´s Off-Market Equity Financing Environment
References
Chapter 3: Digital Platform Start-ups
3.1 Going Digital: An Undeniable Reality
3.2 Qualifying Characteristics of Digital Platform Start-ups
3.3 Drivers of Digital Platform Start-ups
3.4 Digital Platform Trends
3.5 Digital Platform Start-ups: Four Cases
3.5.1 Wimdu: At the Mercy of a Strong Competitor
3.5.2 Monoqi: Stagnation and Investor Strife
3.5.3 Omio: Exponential Growth as a Financing Magnet
3.5.4 Medwing: The Indispensability of Innovativeness
3.6 Criterion for Digital Platform Start-up Success in Germany
3.7 Distinction Between Start-ups and Digital Platform Start-ups
References
Chapter 4: The Emergence of Entrepreneurial Ecosystems
4.1 Status Quo of Germany´s Entrepreneurial Ecosystem
4.2 Agglomeration as a Necessary Condition
4.3 Transformation Via Start-up Networks
4.4 Inadequacies and Upcoming Challenges
4.5 German Federal Government´s Initiatives
4.5.1 Fostering a Risk-Taking Culture
4.5.2 Promoting Venture Capital Ecosystem in Germany
4.5.3 Zukunftsfond and Zukunfsfinanzierungsfond
References
Chapter 5: Private-Equity as Start-up Financing Source
5.1 Features of Private Equity
5.2 Status Quo of Private Equity in Germany
5.3 Impending and Upcoming Challenges
5.4 The Debate on Regulation
5.5 Private Equity Volume in Germany
References
Chapter 6: Venture Capital as Start-up Financing Source
6.1 The Beginnings of Venture Capital
6.2 Venture Capital Characteristics
6.3 Status Quo of Venture Capital in Germany
6.4 Expected Venture Capital Growth in Germany
6.5 Venture Capital Volume in Germany
References
Chapter 7: Venture Capital as a Subset of Private Equity
7.1 Structural Differences Between Private Equity and Venture Capital
7.2 Decision-Making Criteria in Private Equity
7.2.1 Stereotypical Target Company Approach
7.2.2 Non-stereotypical Basic Targeting Approach
7.2.3 Target Criteria Before Acquisition
7.2.4 Private Equity Investment Criteria
7.2.4.1 Finance
7.2.4.2 Strategy
7.2.4.3 Management
7.2.4.4 Product and Service
7.2.4.5 Additional Aspects
7.2.5 Venture Capital Investment Criteria
7.2.6 Financial Resource Crunch May Hamper Start-up Growth
References
Chapter 8: Research Design
8.1 Guided Expert Interview
8.2 Research Ethics
8.3 Research Questions and Hypotheses
8.4 Choice and Appraisal of Method
8.5 Methodological Approach
8.6 Selection of Experts
8.7 Interviewee Details
8.8 Guideline-Based Expert Interview
8.9 Data Preparation Based on Mayring´s (2010) Content Analysis Method
8.10 Limitations of Employed Research Method
References
Chapter 9: Research Analyses and Results
9.1 Founding and/or Managing Team
9.1.1 Diversity of Team Skills, Tech-World Knowhow and Marketing
9.1.2 Conviction of Idea and Founder/Team Drive
9.1.3 Sales Force and Process-Orientation
9.1.4 Multiple Founders, Clarity of Goal, and Ambition
9.1.5 Pitching Quality and Argumentative Efficiency as Vital to Seed Investors
9.1.6 Conclusion
9.2 Innovativeness
9.2.1 Uniqueness and Market Differentiation
9.2.2 Functionality of Business Idea
9.2.3 Business Model as a Solution
9.2.4 Patents and Buyer Power
9.2.5 Conclusion
9.3 Market Attractiveness
9.3.1 Value of the Online Market
9.3.2 Size of the Identified Market
9.3.3 Minimum Viable Product and Uncontested Markets
9.3.4 Potential Market Monopoly and Niche-Building
9.3.5 Conclusion
9.4 Financial Metrics
9.4.1 Business Plan as Nice-to-Have
9.4.2 Customer Acquisition as Key Metric
9.4.3 Customer Retention Rate and Key Account Management
9.4.4 Conclusion
9.5 Scalability
9.5.1 Scalability Enhances Valuation
9.5.2 Pace of Critical Mass
9.5.3 Exponential User Growth
9.5.4 Scalability as Founders´ Attribute
9.5.5 Conclusion
9.6 Prominent Investor
9.6.1 Investors as Endorsers
9.6.2 Tier-1 Investors Enhance Start-up Competitiveness
9.6.3 Conclusion
9.7 Revenue Growth
9.8 Location
References
Chapter 10: Summary and Recommendations
10.1 Research Design Summary
10.2 Discussion of Results
10.2.1 Primary Criteria
10.2.2 Secondary Criteria
10.2.3 Tertiary Criteria
10.2.4 Non-criteria
10.2.5 Conclusion
10.3 Implications for Venture Capital Strategy
10.3.1 Skillset and Team Structure
10.3.2 Sales Mapping
10.3.3 Team Dynamics in Hardships
10.3.4 Dynamic Capabilities
10.3.5 Drive for Innovativeness
10.3.6 Elucidation of Unique Selling Proposition
10.3.7 Problem-Solving Approach
10.3.8 Indispensability of Online Market
10.3.9 Niche-Market Value
10.3.10 Expected Customer Growth, Retention, and Churn Rate
10.3.11 Clarification of Scalability Potential
10.3.12 Track Record of Venture Capital Investor
10.3.13 Team-Building and Long-Term Skill-Planning
10.4 Implications for Research
10.5 Implications for General Practice
References
