Study: Founders have a decisive influence on their financing

Venture capital is the lifeblood of start-ups - but how do investors decide who to give money to? What influence do the founders of start-ups have and what consequences does corona have for the scene? A study provides answers.

Good news for the founders of start-ups: in the 2020 venture capital market study by auditing and consulting firm PricewaterhouseCoopers (PwC), 70% of investors state that founders can influence the price of their company during negotiations. Investors also look at the founders themselves: Motivation is seen as very important by over 70 percent, and personality and "visionary strength" also play a role. In addition to these aspects, market-specific criteria and the unique selling proposition are also decisive. In general, German start-ups show that only very few investors give more than 15 million euros.

"The financial ecosystem has a decisive influence on the development of young companies," says Prof. Dr. Dirk Honold, Professor of Corporate Finance and author of the study. In order for domestic rather than foreign funds to lead the financing rounds in future, more capital simply needs to flow into the funds.

After the first investment, however, around 80 percent of investors plan to remain involved in subsequent rounds in order to secure their shares. Nevertheless, loyalty does not last forever: almost no fund invests across all phases, and they are hardly involved in seed and growth deals in particular. They usually invest their money for five to eight years, although "less is more" applies in Germany - 70 percent of investors only complete five deals per year.

74 investors responded to 113 questions in the venture capital market study. Together, they complete around 400 deals a year, most of them under five million euros. Half of the investors surveyed are traditional venture capitalists. The total volume of investors in the study amounts to two billion euros.