What qualities do government-owned venture capital investors seek in a new venture?

A comparison of investment criteria across pre-seed, seed, and expansion stage startups

Authors

DOI:

https://doi.org/10.14267/VEZTUD.2020.11.06

Keywords:

venture capital, governmental venture capital, seed investment, investment criteria, startup financing, business plan

Abstract

Private venture capital (VC) investors usually do not invest in early life-cycle stage startups such as seed and pre-seed companies, since investment size typically doesn’t reach investment thresholds. The entry of governments with fund managers to venture capital markets presents seed and pre-seed companies with the opportunity to receive funding. This paper examines the main investment preferences of Hungarian government-owned venture capital investors regarding pre-seed, seed, and expansion stage startups. Verbal protocol analysis enabled examination of the screening process in real-time in all three life-cycle stages. It is found that governmental VC funds mostly value financial indicators followed by market-related qualities while private VCs value these characteristics in alternate formation. However, in the pre-seed stage, the financial acumen and capabilities of management teams form the main criteria in similarity to angel investors. Governmental VCs also greatly seek innovational value in target firms.

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Author Biographies

Endre Mihály Molnár, Corvinus University of Budapest

Assistant Research Fellow

Erika Jáki, Corvinus University of Budapest

Associate Professor

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Published

2021-07-22

How to Cite

Molnár, E. M., & Jáki, E. (2021). What qualities do government-owned venture capital investors seek in a new venture? A comparison of investment criteria across pre-seed, seed, and expansion stage startups. Vezetéstudomány / Budapest Management Review, 51(11), 64–76. https://doi.org/10.14267/VEZTUD.2020.11.06

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