Study: Founders have a decisive influence on their financing
Venture capital is the lifeblood for start-ups - but how do investors decide who to give money to? What influence do the founders of the start-ups have and what consequences does Corona have for the scene? A study provides answers.
Good news for startup founders: in the Venture Capital Market Study 2020 by the accounting and consulting firm PricewaterhouseCoopers (PwC), 70 percent of investors say that founders can influence the price of their company in negotiations. In addition, investors look at the founders themselves: Motivation is considered very important by over 70 percent, and personality and "visionary power" also play a role. In addition to these aspects, market-specific criteria and the unique selling proposition are also decisive. Basically, for German start-ups, it shows that only very few investors give more than 15 million euros.
"The financial ecosystem decisively shapes the development of young companies," says Prof. Dr. Dirk Honold, Professor of Corporateﬁnancing and author of the study. To ensure that domestic rather than foreign funds increasingly lead financing rounds in the future, he says, more capital simply needs to flow into the funds.
After the initial investment, however, about 80 percent of investors plan to stay on for subsequent rounds to secure their stakes. Still, loyalty doesn't 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 in Germany "less is more" - 70 percent of investors complete only five deals per year.
In the venture capital market study, 74 investors responded to 113 questions. Together, they close 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.
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