Ph.D. Thesis Colloquium of
Ms. Jagriti Bhattacharyya
Date: 2nd September 2024 [Monday]
Time: 03:00 PM
Venue: Seminar Hall [Management Studies]
Title:
Financing Strategies of Digital Start-ups in India: Determinants, Value, and Impact of VC Involvement
Abstract:
In recent years, the increased emphasis on digitalisation aided by advancements in technology has led to the growth of digital startups in India. However, considering the enhanced uncertainty in the lifecycle of a digital startup and their high failure rates compared to non-digital ventures, accessing VC financing is a challenge as well as a decisive element that influences their survival and scale-up (Cavallo et al., 2019; Nguyen-Duc et al., 2016). Thus, it becomes pertinent for us to examine what signals the quality of these digital startups to external financiers such as VCs and subsequently influences their likelihood of accessing VC financing. Subsequently, after accessing VC financing, it becomes pertinent for us to examine whether entrepreneurs of digital startups tend to value the contributions made by VCs beyond the provision of financial resources and if so, under what circumstances. And finally, although the impact of VC involvement with startups in general has been examined, digital startups being a relatively new context, it remains to be seen what impact VCs’ involvement has on the performance of digital startups.
Analysing a sample of 124 digital startups in India, we find that during the selection stage, the founders’ perception of VCs’ ability to contribute non-financial value-added services influences their decision to seek VC financing. But at the decision stage, signals emanating from younger stage entrepreneurs with an education pedigree from premier institutes, startups that are incubated in an incubator or are part of an accelerator program, or those building businesses focusing on digitally enabled business models, are likely to be valued highly by VCs and therefore have a higher likelihood of receiving VC financing. Further, from our analysis of the second objective, we infer that entrepreneurs do tend to perceive the VCs’ involvement with their start-ups as value-adding rather than solely relying on them for financing and such perceptions are likely to be influenced by the external resource dependencies of the entrepreneurial team as well as the relationship dynamics within the entrepreneur-VC dyad. Furthermore, we find that financial performance related milestones of the startup do not appear to be influenced by the involvement of VCs. In addition, our results also suggest that founders who seek to retain control of their ventures could also do without involving VCs as involvement of VCs is more likely to result in hiring external CXOs. On the contrary, our results indicate that startup founders who are looking for non-financial value-added services such as mentorship and aid in professionalisation of their ventures, access to strategic networks, etc along with meeting their financing requirements are likely to derive better value through VCs’ involvement.
ALL ARE WELCOME