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The aim of this study is to investigate in the role of Venture Capital in the development of New Technology Based Firms in two countries: USA and Germany. Based on literature review and empirical work issues concerning the extent and stage of financing, the nature of oversight provided by Venture Capitalists and the framework conditions for Venture Capital are subject of investigation. The results have been reflected in a workshop with experts from research, industry and policy.

Inhaltsverzeichnis

Frontmatter

1. Introduction

Abstract
The objectives of this comparative study are to generate analytical insights into the role of venture capital as a means of financing new technology based firms. Venture capital does not solely focus on new technology based firms. For example, financing the expansion of established companies as well as the financing of management buyouts and buyins constitutes a major part of this investment business. However, with regard to the historical role VC has played in the development of today’s large businesses such as Apple, Advanced Micro Devices, Digital Equipment, or Intel, new technology based firms can be seen as important vehicle in the commercialization of technological inventions. It is well-known that the process of developing new technology involves uncertainty and risk. Hence, venture capital - in its traditional role - is a suitable means of fostering technological development.1
Oliver Pfirrmann, Udo Wupperfeld, Joshua Lerner

2. Venture Capital Markets, New Technology Based Firms and Financial Systems: Definitions and an Overview of the US and German Experiences

Abstract
There are many different definitions of what is meant by venture capital. As late as the mid- seventies, Liles8 presented a broad spectrum of definitions of venture capital investment:
  • investment in any high-risk financial venture;
  • investment in unproven ideas, products, or start-up situations; i. e. the provision of what is called ’seed capital’;
  • investment in going concerns that are unable to raise funds from conventional public or commercial sources,
  • investment in large and - in some cases - controlling interests in publicly traded companies where there is a considerable degree of uncertainty.
Oliver Pfirrmann, Udo Wupperfeld, Joshua Lerner

3. Framework Conditions for Venture Capital: Results of the Literature Review

Abstract
Venture capital funds raise capital to invest in new business projects. These funds act as agents between the entrepreneurs who face search costs in locating funding, and uninformed institutional and individual investors. While venture capital comprises a relatively small percentage of capital market activities in the US, it provides an important source of funding for small businesses and offers the potential for high returns for investors. The industry has been responsible for helping to establish numerous successful enterprises. Among them are Apple Computer, Intel, Federal Express, Microsoft, and Lotus Development. Venture capitalists, unlike many other equity market participants, take active roles within their portfolio firms. In addition to the deal’s origination, screening, evaluation, and structuring, they are responsible for monitoring the venture’s post-investment activities on behalf of the investors in their managed funds. A venture capitalist often takes some form of a non executive managerial position within the portfolio company.
Oliver Pfirrmann, Udo Wupperfeld, Joshua Lerner

4. Ten Case Studies of Venture-backed Firms and their Investment Companies

Abstract
It is widespread knowledge among experts of research strategies that both qualitative and quantitative methods have their own value. At its best, a comprehensive research design would include both approaches in order to overcome the deficits of each strategy. However, there are reasons for deciding which strategy would be more appropriate given the proposed questions. Pragmatic reasons (the available research budget or time) as well as context-related reasons, often influence this decision, such as a very heterogeneous field of investigation, for example, in cases where the necessity of pilot or exploratory research is very great.
Oliver Pfirrmann, Udo Wupperfeld, Joshua Lerner

5. Summary and Overall Conclusions

Abstract
This US-German study has compared the role of venture capital in these two countries as a means of financing new technology based firms. Well-known examples of today’s large businesses in the US, for example, Apple, Advanced Micro Devices, Digital Equipment and Intel are often selected to demonstrate that, in some cases, venture capital has had a significant impact on NTBFs. In Germany, discussions about venture capital exerting this kind of impact have been audible since the mid-eighties. However, while the differences between the US and German VC markets seemed to have narrowed over time, one can still point out several distinctions between venture capital industries in the US and Germany.
Oliver Pfirrmann, Udo Wupperfeld, Joshua Lerner

6. References

Without Abstract
Oliver Pfirrmann, Udo Wupperfeld, Joshua Lerner

Backmatter

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