This thesis deals with investments in venture capital and private equity in Central and Eastern Europe. The objective I have chosen is to map the evolution of this market and compare it with euro-wide trends using methods of descriptive statistics. As a basis I used statistics of European venture capital and private equity association. The teoretical part includes an introduction to the topic and definition of important concepts. The practical part deals with the development of this market in terms of fundraising, investment activity and exits. The region still lags behind the european numbers both in the amount of fundraising, investment activity and exits. However atractivity for investors is growing. The difference between countries in the region and the rest of Europe is gradually decreasing. The region follows the trends in European market with one year's delay. The are relatively strong fluctuations directed mainly by buyouts. There are very little investments in development of new, viable companies.

Venture capital (VC), a historically American industry, has been in the process of globalizing in recent years. International venture capital flows (investing outside of one’s own country) have grown substantially over the past 30 years and even more dramatically in just the past decade. Previous research has mostly highlighted the determinants of where capital flows. However, research on the factors in a VC’s home country that affect investments abroad has been underdeveloped. To address this gap, this paper explores the impact of home country economic conditions on VCs’ propensity to invest abroad. I find that higher interest rates and economic wellbeing in a country (as measured by GDP growth and stock market capitalization to GDP) are associated with less deal flow abroad and, that higher foreign exchange rates are related to greater deal flow. I also note an interesting divergence in the role of these factors between VCs located in countries that exhibit different levels of international investing experience. My research indicates that VCs’ home country economic conditions do play a role in their decisions to invest abroad and suggests that these considerations may be different depending on the experience level of the VC industry in the firm’s country.

Less than 1% of minority women receive venture capital funding for technology enterprises. The purpose of the multiple case study was to explore the strategies used by Black female entrepreneurs to obtain venture capital funding for their technology businesses in the United States. The conceptual framework for the study was the social network theory of entrepreneurship. Data were collected through semistructured interviews with 5 Black female entrepreneurs who founded technology ventures in the United States. Journaling before and after each interview aided the methodological triangulation, which ensured validation. Yin's data analysis process was used, and the data were reviewed, codes determined, emerging themes noted, and iterative explanation building undertaken. The main themes emerging from the analysis of the data were the participation in pitch competitions, the importance of networks, and communication. The findings may contribute to social change because other minority female, technology entrepreneurs can use the strategies of the participants as a model in their quest to receive venture capital funding. An increase in the number of minority women who receive venture capital funding and engage in high-growth entrepreneurship may result in an improved standard of living for the women and their families. Society could also benefit from a more diverse pool of technological innovations.

Moral Hazard and the Agency Costs thereof have long been accepted arguments in venture finance theory and have therefore long been accepted shortcomings in the venture capitalist / entrepreneur relationship. In psychological experiments ??? including economic ??? it has been shown that human beings prefer to act in a reciprocal manner that reduces any inequity in a relationship. Humans who expect to receive an unfair and inequitable position in a relationship, will take steps to rectify that position. Specifically, if a venture capitalist expects the entrepreneur to unfairly extract private benefits from the investee company post investment by the venture capitalist, then he or she will impose costly controls and monitoring mechanisms in place to prevent that. All relationships that impose controls and monitoring mechanisms are inefficient, as opposed to Advising the investee which draws upon the skills of the venture capitalist and is generally efficient. The venture capital industry is comprised of intelligent and professional people who can recognise inefficiency easily. Indeed, this is how they make poorly managed companies into profitable trade sales or IPO???s. The online survey completed for this thesis poses questions that attempt to show that venture capitalists and entrepreneurs are not locked in an antagonistic relationship where each merely acts in a self interested way. This thesis concludes that venture capitalists and entrepreneurs do work in a reciprocal relationship recognising the substantial efficiency gains to be made by doing so.

<p>Background: Growth oriented entrepreneurial businesses need funding for the development of their idea, technology, product etc. However, for the businesses in the very earliest stages of development, access to funding is very limited. Growing young ventures are important job creators and positively affect growth in an economy. Bridging the gap of funding to these companies is therefore on the agenda of governments around the world. </p><p>Purpose: To describe the situation facing seed stage investing venture capitalists. I will emphasize difficulties and evaluate venture capitalists ability in addressing them. Effects of the difficulties in form of access to financing for entrepreneurs and a possible need for government intervention will be examined. </p><p>Method: Empirical information from seed stage investing venture capital organizations have been collected in the form of face-to-face interviews, email- questionnaires and a telephone interview. Organizations from Sweden, Denmark and Germany are included in the study. </p><p>Result: Several factors make seed stage investing unattractive compared to later stages. Important difficulties are higher risks, high costs for fund management, goal incongruence in the investor – venture capitalist relation and lack of bargaining power for seed venture capitalists. Environmental factorsthat have an impact on seed investing are the deal flow, the investment climate and access to soft funding. Seed stage investing is a very challenging business and the difficulties are to a large extent hard to overcome. The investors more likely have to accept them and I conclude that long term profitability of seed funds is unlikely, at least in absence of government support in form of soft funding towards the entrepreneurial businesses.</p>

Private equity investing (PE) has experienced rapid growth on a global scale over the last few decades to become a significant industry. While scholars have devoted considerable effort to studying the area of risk capital investing into businesses, research about private equity as an asset class is surprisingly scarce. This dissertation addresses this gap by enhancing understanding of PE fund investing in general, and specifically about how heterogeneity in investor-specific characteristics and entry order strategies may impact performance. Based on a comprehensive set of interviews with PE fund investors, in-dept insights about variances in motives for investing in the asset class, ways of working, and investment strategies across investors were acquired; findings that are elaborated upon in the dissertation. In addition, to facilitate a thorough investigation of the links between organizational characteristics, entry order and performance, hypotheses were tested through the statistical analysis of unique data covering PE funds raised in Sweden over a twenty-year period. Among several novel results, this study indicates that the level of environmental uncertainty has a clear impact on which organization-specific factors explain entry order, as well as which factors impact the ability of an organization to take advantage of a chosen entry order. Furthermore, the study points at organizational reputation as an especially valuable asset in situations of uncertainty. While a good reputation does not directly lead to superior performance, it may be used in exchange for favorable entry order positions. / <p>Diss. Stockholm : Handelshögskolan i Stockholm, 2011</p>

<p>Diss. Stockholm : Handelshögskolan i Stockholm, 2008</p>

Background: Growth oriented entrepreneurial businesses need funding for the development of their idea, technology, product etc. However, for the businesses in the very earliest stages of development, access to funding is very limited. Growing young ventures are important job creators and positively affect growth in an economy. Bridging the gap of funding to these companies is therefore on the agenda of governments around the world. Purpose: To describe the situation facing seed stage investing venture capitalists. I will emphasize difficulties and evaluate venture capitalists ability in addressing them. Effects of the difficulties in form of access to financing for entrepreneurs and a possible need for government intervention will be examined. Method: Empirical information from seed stage investing venture capital organizations have been collected in the form of face-to-face interviews, email- questionnaires and a telephone interview. Organizations from Sweden, Denmark and Germany are included in the study. Result: Several factors make seed stage investing unattractive compared to later stages. Important difficulties are higher risks, high costs for fund management, goal incongruence in the investor – venture capitalist relation and lack of bargaining power for seed venture capitalists. Environmental factorsthat have an impact on seed investing are the deal flow, the investment climate and access to soft funding. Seed stage investing is a very challenging business and the difficulties are to a large extent hard to overcome. The investors more likely have to accept them and I conclude that long term profitability of seed funds is unlikely, at least in absence of government support in form of soft funding towards the entrepreneurial businesses.

Bakgrund: De svenska börsbolagen gör större vinster än någonsin tidigare, men har fått stor kritik för att vara för långsamma i sin vinstallokering. Företag med överkapitaliserade balansräkningar utan investeringsbehov är potentiella måltavlor för riskkapitalisternas affärsidé om finansiell effektivisering och en aggressivare kapitalstruktur. Debatten i media har skapat kritik kring dessa så kallade kortsiktiga och giriga bolagsplundrare som påstås förstöra finansiella värden och kreditvärdigheten i företagen. I tidigare fall har marknaden svarat positivt på riskkapitalisternas investeringar, något som har reflekterats i ett kraftigt ökande aktiepris. Skeptiker hävdar dock att spekulationer är anledningen till att marknadsvärdet drivs upp, inte fundamentala aspekter. Syfte: Syftet med denna magisteruppsats är att fastställa en bild av fenomenet riskkapital och hur dess aktiva ägande inverkar på svenska börsbolags kreditbetyg, kapitalstruktur och värdering. Metod: För att uppnå syftet med vår magisteruppsats har en kvalitativ ansats till-lämpats baserad på tre börsbolag där riskkapitalisters aktiva ägande spelat en betydande roll. Det empiriska materialet har insamlats genom personliga intervjuer med aktie- och kreditanalytiker, och studien förlitar sig även på markandsdata, artiklar och nyhetssändningar i media, samt respektive bolags kvartals- och årsrapporter. Slutsats: Studien har gjorts over den tidsperiod som varit riskkapitalisternas inve-steringshorisont – explicit och implicit. Genom att analysera det aktiva ägarskapet i tre svenska börsbolag kan slutsatsen dras att det inverkat positivt i form av högre prestanda och marknadsvärdering. De finansiella förändringarna har, till skillnad från kritiken, styrkt kreditbetyget i fallen Lindex och Volvo. En analys av Skandia/Old Mutual visade dock en marginellt ökad kreditrisk. Slutsatsen visar härmed att riskkapitalisternas inverkan på svenska börsbolag är värdeförädlande utan att äventyra den finansiella statusen. / Background: The Swedish blue chip companies are performing better than ever, but have been strongly criticised for being too slow in their excess fund allocation. Companies with overcapitalised balance sheets and no investment needs are potential targets for activist funds’ business idea of more aggressive capital structures and financial restructuring. In media, this debate has raised criticism against these so called short-sighted, greedy asset-strippers that destroy company values and increase the companies’ risk of default. In prior cases where activist funds have taken actions, the market has responded positively through increasing the share price. However, sceptics argue that the higher share price is merely a response to a speculative reaction with no fundamental argument supporting the upgrade in market capitalisation. Purpose: The purpose of this thesis is to establish a view of the phenomenon of activist funds and their impact on blue chip companies’, listed on the Stockholm Stock Exchange, credit rating, capital structure and valuation. Method: To fulfil the purpose of our master thesis, a qualitative approach has been applied based on three cases involving the activities of activist funds. The empirical findings have been retrieved via personal communications with stock- and credit analysts, and the study also relies on articles and news coverage from media, stock market data and annual reports from each of the chosen companies respectively. Conclusion: The study has regarded the period of time which has been the investment horizon of the activist funds – explicitly and implicitly. Analysing their active ownership, the conclusion can be drawn that these activist funds have clearly had a positive impact on each of the blue chip companies’ performance and intrinsic value respectively. The financial restructuring has - contrarily to the criticism – strengthened the credit ratings in the cases of Lindex and Volvo. In the Skandia/Old Mutual-case, a marginally higher default risk was detected. Thus, the study has concluded that activist funds indeed add significant shareholder value without jeopardising the companies’ financial statuses.

Many venture capitalists (VCs) use the “VC method” of valuation where they use judgment to estimate a probability of successful exit while determining the ownership share to demand in exchange for investing in a venture. However, prior models are not aligned with the “VC method” because they do not consider private information about entrepreneurial characteristics, the primary drivers of the above probability, and consequently do not model judgment. The three main chapters of this thesis—one theoretical, one simulation, and one empirical study—examine the venture capital deal process in sync with the “VC method.” Chapter 2 is theoretical and develops a principal-agent model of venture capital deal process incorporating double-sided moral hazard and one-sided private information. The VC is never fully informed about the entrepreneur’s disutility of effort in spite of due diligence checks, so takes on a belief about the latter’s performance in the funded venture to determine the offer. This study suggests that there exists a critical point in the VC’s belief—and correspondingly in the VC’s ownership share—that maximizes the total return to the two parties. It also uncovers optimal revision strategies for the VC to adopt if the offer is rejected where it is shown that the VC should develop a strong advisory capacity and minimize time constraints to facilitate investment. Chapter 3 simulates venture capital deals as per the theoretical model and confirms the existence of critical points in the VC’s belief and ownership share that maximize the returns to the two parties and their total return. Particularly, the VC’s return (in excess of his or her return from an alternate investment) peaks for a moderate ownership share for the VC. Since private information with the entrepreneur would preclude the VC from knowing these critical points a priori, the VC should demand a moderate ownership share to stay close to such a peak. Using data from simulations, we also generate predictions about the properties of the venture capital deal space—notably: (a) Teamwork is crucial to financing; and (b) If the VC is highly confident about the entrepreneur’s performance, it would work to the latter’s advantage. Chapter 4 reports the results from our survey of eight seasoned VCs affiliated with seven firms operating in Canada, USA, and UK, where our findings received a high degree of support.