Frontiers of Entrepreneurship Research
1997 Edition


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John Freear
Roger Grinde
Jeffrey Sohl

University of New Hampshire
Durham, NH 03824

Telephone: 603-862-3341
Fax: 603-862-4468

Principal Topics

The objective of this research is to identify venture financing strategies based on the experience of today's successful entrepreneurs in technology-based ventures.  In particular, it seeks to test the hypothesis that there is a complementary relationship between venture capital funds and private investors, to identify the investment and exit strategies of private investors and the relationship of private investors with the ventures in which they invest.  The research is, in part, a replication and an extension of an earlier study of the financing of new technology-based firms.


The research draws on the results of a mail survey sent to the Chief Executive Officer of over two thousand high-growth, technology-based, entrepreneurial ventures in the United States.  These ventures, over seventy-five per cent of which are less than five years old, span five key high-technology sectors: biotechnology, energy, environmental, software, and communications.

Major Findings

The response rate is 13.6%.  At the time of writing, survey data are still being analyzed. The survey instrument asks respondents to provide the year, source, amount, and stage of each round of outside equity financing.  The survey seeks more details of one financing round?the earliest round of outside equity financing that was at least $50,000 in total. It seeks information on how many private investors participated, their location relative to the venture, and on the presence or absence of a "lead" investor.  The remaining questions deal with the return expectations of their investors in the round, their proposed exit strategy, and their expected holding period; the percentage of equity acquired by the outside investors, their role in managing, advising or working for the venture, and how productive was that role; and, finally, their reasons, if any, for making the investment other than the
 expectation of financial return.

Depending upon the outcome of the survey analysis, it is anticipated that the complementary relationship between venture capital funds and private investors in the financing of high-tech entrepreneurial ventures will be confirmed and further understood.  The research will offer insights into the importance of private investors to the financing of such entrepreneurial ventures, their motivation, their role in the development of the venture, their expectations regarding holding periods, exit strategies and financial returns.  These insights should assist participants in the informal venture capital market to make more informed investment and financing decisions and assist public policy formation by adding to our knowledge of the market.

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