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Reducing the financial gap – how to improve the relationship between entrepreneurs and investors

Asplund, Gustav and Henriksson, Jesper (2012) MIO920
Production Management
Abstract
Purpose: The purpose of the thesis is to better understand the early stage investment process, and with this deeper understanding provide Ideon Innovation with recommendations of how to improve the interactions between investors and entrepreneurs.
Methodology: The thesis has been conducted with a mixture between a systems approach and an actors approach. An abductive research method has been chosen, containing mainly qualitative studies.
Literature was initially reviewed in order to create a theoretical framework, which together with an analysis of empirical findings from surveys and interviews with entrepreneurs and investors, resulted in recommendations of measures Ideon Innovation can take to improve the interactions between investors... (More)
Purpose: The purpose of the thesis is to better understand the early stage investment process, and with this deeper understanding provide Ideon Innovation with recommendations of how to improve the interactions between investors and entrepreneurs.
Methodology: The thesis has been conducted with a mixture between a systems approach and an actors approach. An abductive research method has been chosen, containing mainly qualitative studies.
Literature was initially reviewed in order to create a theoretical framework, which together with an analysis of empirical findings from surveys and interviews with entrepreneurs and investors, resulted in recommendations of measures Ideon Innovation can take to improve the interactions between investors and entrepreneurs.
Theoretical framework: An extensive theoretical framework has been developed, containing definitions and characteristics of the three main actors in the studied system; entrepreneurs, investors and the incubator. Furthermore, relevant theories regarding investment processes and financing have been reviewed.
Empirics: Data has been gathered from the incubator, investors and entrepreneurs. A mapping of current activities at the incubator was made through interviews with the management, followed by surveys sent to a large population of investors and entrepreneurs. This initial data collection was later complemented with in-depth interviews with six investors and five entrepreneurs.
Conclusion: The investment processes in early-stage companies are complex and heterogonous, each and every investment being almost unique. All explanations found in this thesis are derived from the same fundamental problem: the investors are risk-averse and an investment in an early-stage company involves high risk. Another vital issue is the presence of asymmetric information between the two
VI
actors, which means that the investor does not know with which objective the entrepreneur uses the investor‟s money. These problems lead to a financial gap, where it is difficult for early-stage companies to raise capital from external investors.
The authors have through an analysis of previous research and the data collected from both investors and entrepreneurs identified eight measures Ideon Innovation can take to reduce the financial gap and improve the interactions between investors and entrepreneurs. The measures include e.g. making the companies more investment-ready, increasing their sales-focus and arranging informal events where investors and entrepreneurs can meet. (Less)
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author
Asplund, Gustav and Henriksson, Jesper
supervisor
organization
course
MIO920
year
type
M1 - University Diploma
subject
keywords
The financial gap, entrepreneur, business angels, venture capital-firms
other publication id
12/5430
language
English
id
3217871
date added to LUP
2012-11-30 11:45:38
date last changed
2012-11-30 11:45:38
@misc{3217871,
  abstract     = {Purpose: The purpose of the thesis is to better understand the early stage investment process, and with this deeper understanding provide Ideon Innovation with recommendations of how to improve the interactions between investors and entrepreneurs.
Methodology: The thesis has been conducted with a mixture between a systems approach and an actors approach. An abductive research method has been chosen, containing mainly qualitative studies.
Literature was initially reviewed in order to create a theoretical framework, which together with an analysis of empirical findings from surveys and interviews with entrepreneurs and investors, resulted in recommendations of measures Ideon Innovation can take to improve the interactions between investors and entrepreneurs.
Theoretical framework: An extensive theoretical framework has been developed, containing definitions and characteristics of the three main actors in the studied system; entrepreneurs, investors and the incubator. Furthermore, relevant theories regarding investment processes and financing have been reviewed.
Empirics: Data has been gathered from the incubator, investors and entrepreneurs. A mapping of current activities at the incubator was made through interviews with the management, followed by surveys sent to a large population of investors and entrepreneurs. This initial data collection was later complemented with in-depth interviews with six investors and five entrepreneurs.
Conclusion: The investment processes in early-stage companies are complex and heterogonous, each and every investment being almost unique. All explanations found in this thesis are derived from the same fundamental problem: the investors are risk-averse and an investment in an early-stage company involves high risk. Another vital issue is the presence of asymmetric information between the two
VI
actors, which means that the investor does not know with which objective the entrepreneur uses the investor‟s money. These problems lead to a financial gap, where it is difficult for early-stage companies to raise capital from external investors.
The authors have through an analysis of previous research and the data collected from both investors and entrepreneurs identified eight measures Ideon Innovation can take to reduce the financial gap and improve the interactions between investors and entrepreneurs. The measures include e.g. making the companies more investment-ready, increasing their sales-focus and arranging informal events where investors and entrepreneurs can meet.},
  author       = {Asplund, Gustav and Henriksson, Jesper},
  keyword      = {The financial gap,entrepreneur,business angels,venture capital-firms},
  language     = {eng},
  note         = {Student Paper},
  title        = {Reducing the financial gap – how to improve the relationship between entrepreneurs and investors},
  year         = {2012},
}