Why do European Venture Capital Companies syndicate?

Financial theory, resource-based theory and access to deal flow are used to explain syndication practices among European venture capital (VC) firms. The desire to share risk and increase portfolio diversification is a more important motive for syndication than the desire to access additional intangible resources or deal flow. Access to resources is, however, more important for non-lead than for lead investors. When resource-based motives are more important, the propensity to syndicate increases. Syndication intensity is higher for young VC firms and for VC firms, specialised in a specific investment stage. Finally, syndication strategies are similar across European countries, but differ from North American strategies.

Le capital-risque, accélérateur de croissance

and discusses the implications. The resulting synthesis provides new insights fo

Rising star monitor: providing insight into remuneration and founding team composition of young, high-potential Belgian ventures

This report provides a snapshot of the trends and challenges involved in young, high-potential ventures in Belgium. Our insights are based on data gathered from 170 young, high-potential Belgian ventures with 370 founders in a wide cross-section of industries. For a more detailed understanding, we have –where relevant– split up our results for high- versus low-growth ambition ventures (HGV versus LGV). Indeed, even though all sampled ventures show some indication of having high growth potential, only around one third of our respondents also indicated having a high growth ambition in terms of their aspired future company size. This group corresponds to what is now often referred to as scale-ups. Hence, potential does not necessarily equal ambition. In this Monitor, we pay special attention to the topics of founding team composition, their equity split and remuneration.2 As such, it is the first study to provide insight into questions such as how many founders young, high-potential Belgian ventures have, where co-founders are found, how founding teams split their equity and what equity stake they retain. We also provide detailed information on founders’ cash remuneration (e.g., as related to company size and industry)

The planned decision to transfer an entrepreneurial company.

The Theory of Planned Behavior (TPB) is used in this paper to empirically study whether an entrepreneur successfully transfers his/her firm, conditional on exiting the firm. TPB posits that entrepreneurial intentions drive actions, being the transfer of a business. We expand the TPB framework with business characteristics (intangible assets and profitability) to further explain the gap between intentions to transfer and the transfer outcome. Based on survey responses of 198 Belgian entrepreneurs that exited their company between 2001 and 2006, we show that intentions drive transfer outcomes. Further, the personal desirability of a transfer, the perceived control over the transfer process and the level of intangible assets influence intentions. Business profitability has a direct positive effect on the probability of transferring a business, that is partially mediated through intentions.

First-round valuation of angel-backed companies: the role of investor human capital

In this first paper of the special issue, we identify some trends in open innovation research by analysing how the literature on this topics has evolved since the introduction of the concept in 2003. Research on open innovation has been mushrooming ever since and the scope has been broadened in different directions. Researchers also started to analyse open innovation at different level of analysis from the individual actors in organisations to ecosystems and national innovation systems. Despite the vast growth in research on open innovation, we identified several directions for further research: open innovation research should be linked to other management areas such as marketing, HRM, change management, etc. In addition, our understanding of open innovation could be improved if the recently developed insights could be related to the existing management theories

Follow-on financing of venture capital backed companies: the choice between debt, equity, existing and new investors

We study the financing strategies of 191 start-ups after they have received venture capital (VC) and thereby contribute to the staging literature. The VC backed start-ups have raised financing on 345 occasions over a five-year period after the initial VC investment. Surprisingly, bank debt is the most important source of funding for these young and growth-oriented companies, supporting the view that VC investors have a certifying role in their portfolio companies. Bank debt is available to firms with a lower demand for money, lower levels of risk and of information asymmetries, implying that staging of equity funding is less important for these firms. A firm only raises equity when it's debt capacity is exhausted, hinting that equity investors are investors of last resort. New equity is provided by the existing shareholders in 70% of the equity issues, supporting earlier findings that staged financing is important in venture capital financing. New shareholders invest when large amounts of funding are required and when risk and information asymmetries are high. We interpret these findings as support for the extended pecking order theory. In line with syndication arguments, new investors thus provide risk sharing opportunities and skills to screen and monitor and thereby reduce information asymmetries. New equity investors face adverse selection problems, however, in that only the most risky investments are syndicated. Keywords: financing strategy, venture capital, bank debt, external shareholders JEL classification: G3

Financial reporting quality in private equity backed companies: the impact of ownership concentration

We argue and empirically show on a sample of 270 unquoted, private equity backed companies that the shareholder structure of private companies influences the quality of their accounting information. We show that companies in which private equity (PE) investors have a higher equity stake produce accounting information that is of lower quality than companies in which PE investors have a lower equity stake, controlling for company size and age. We argue that this is evidence that a large equity stake is a substitute for high earnings quality