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The Characteristics and Value-Added Contributions of Private Investors to Entrepreneurial Software Ventures

Author

Listed:
  • John Freear

    (Center for Venture Research, U NH)

  • Jeffrey Sohl

    (Center for Venture Research, U NH)

Abstract

The nature and role of early stage equity financing in the development of emerging entrepreneurial ventures in the software industry is examined. To provide an understanding of the relationship between the suppliers of capital and the ventures they bankroll, issues concerning equity positions and holding periods are addressed. Given the unique position of private investors in the early stage equity market, particular attention is given to the characteristics of these investors and the investor characteristics germane to the software industry. Results for the software sector are compared with technology-based companies in an attempt to uncover any discernable differences between the two groups. The research hypothesizes that there are differences in the informal venture capital market among broadly defined sectors in terms of the sectors' technology and competitive conditions and their impact on: first, the need for, and timing of, external equity capital; and secondly, the characteristics and value-added contributions of the private investors attracted to the sector.

Suggested Citation

  • John Freear & Jeffrey Sohl, 2001. "The Characteristics and Value-Added Contributions of Private Investors to Entrepreneurial Software Ventures," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 6(1), pages 84-103, Spring.
    • Handle: RePEc:pep:journl:v:6:y:2001:i:1:p:84-103
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    References listed on IDEAS

    as
    1. Haar, Nancy E. & Starr, Jennifer & MacMillan, Ian C., 1988. "Informal risk capital investors: Investment patterns on the East Coast of the U.S.A," Journal of Business Venturing, Elsevier, vol. 3(1), pages 11-29.
    2. Landstrom, Hans, 1993. "Informal risk capital in Sweden and some international comparisons," Journal of Business Venturing, Elsevier, vol. 8(6), pages 525-540, November.
    3. Ehrlich, Sanford B. & De Noble, Alex F. & Moore, Tracy & Weaver, Richard R., 1994. "After the cash arrives: A comparative study of venture capital and private investor involvement in entrepreneurial firms," Journal of Business Venturing, Elsevier, vol. 9(1), pages 67-82, January.
    4. Freear, John & Sohl, Jeffrey E. & Wetzel, William Jr., 1994. "Angels and non-angels: Are there differences?," Journal of Business Venturing, Elsevier, vol. 9(2), pages 109-123, March.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Becsky-Nagy Patricia, 2013. "Venture Capital In Hungarian Academic Spin-Offs," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 351-360, December.
    2. Douglas Cumming & Minjie Zhang, 2019. "Angel investors around the world," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(5), pages 692-719, July.
    3. Tuo Gladys & Yi Feng & Sarpong Solomon & Wang Wenxin, 2020. "The Second Round Resource Acquisition of Entrepreneurial Crowdfunded Ventures: The Relevance of Campaign and Project Implementation Performance Outcomes," Entrepreneurship Research Journal, De Gruyter, vol. 10(3), pages 1-21, July.

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    More about this item

    Keywords

    Investment Banking; Capital ; Entrepreneurial ; Financing ; Software; Internet Services; New Firms; Startups; Financing Policy; Financial Risk; Risk Management; Capital Structure; Valuation;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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