Access to External Capital for Techno Start-Ups: Evidences from the UK

Investment Management and Financial Innovations, Volume 5, Issue 4, 2008

14 Pages Posted: 7 Feb 2014

See all articles by Tommaso Minola

Tommaso Minola

University of Bergamo

Tim Minshall

University of Cambridge - Institute for Manufacturing

Marco Giorgino

Polytechnic University of Milan

Date Written: 2008

Abstract

How should new technology based firms (NTBFs) finance their business? Some high-tech entrepreneurs choose debt instead of equity in order to preserve their chance of high returns in the future, accepting the greater risks involved. However, some experts believe that the riskier the project, the more entrepreneurs should seek VC support. Our work attempts to answer this question and build a framework helping technology-based entrepreneurs match their business plans with the most appropriate financial strategy. We relate to the pecking order and financial rationing theories. Many attempts to understand them have been developed, but with dominant focus on investor’s supply and their decisional criteria, and few determinants normally investigated at a time. Our approach is novel because it is firm centric and holistic, evaluating the relationship between firm’s profile and the optimal investor. Through multiple in- depth case studies on UK NTBFs, and their critical discussion, we provide entrepreneurs with a robust assessment tool to navigate the complex scenario of financial alternatives available to NTBFs. The research investigates and discusses the role played in the fund raising process by entrepreneur’s profile, technology, features of the business plan and market; it can also help investors understand entrepreneur’s motivations and expectations. Our contribution is twofold: first, the model is made of reliable assessment criteria for complex and ambiguous dimensions such as technological risk and market focus; secondly, we develop a holistic approach with understanding of both the firm’s and investor’s points of view.

Keywords: NTBFs, entrepreneurship, banks, business angel, venture capital, pecking order theory

JEL Classification: G30, G31, G32, M13, O30

Suggested Citation

Minola, Tommaso and Minshall, Tim and Giorgino, Marco, Access to External Capital for Techno Start-Ups: Evidences from the UK (2008). Investment Management and Financial Innovations, Volume 5, Issue 4, 2008. Available at SSRN: https://ssrn.com/abstract=2391684

Tommaso Minola (Contact Author)

University of Bergamo ( email )

Via Salvecchio, 19
Bergamo, 24129
Italy

Tim Minshall

University of Cambridge - Institute for Manufacturing ( email )

17 Charles Babbage Road
Cambridge, CB3 0FS
United Kingdom

Marco Giorgino

Polytechnic University of Milan ( email )

vial Lambruschini 4B
Milan, Milan 20156
Italy

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