Financing Unquoted High-Growth Companies: From Extending

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Table of Contents Acknowledgements........................................................................iii Table of Contents........................................................................... vi List of Tables ................................................................................. xi List of Figures..............................................................................xiii Nederlandstalige samenvatting (Summary in Dutch) ................. xiv Executive Summary....................................................................xvii Chapter 1: General Introduction..................................................... 1 1.1. Finance and Company Growth.....................................................................................2 1.1.1. Study 1: Incremental Finance Decisions in High-Growth Companies: Pecking Order and Debt Capacity Considerations ........................................................................................................ 3 1.1.2. Study 2: Seeking Experienced or Legitimate Partners? A Longitudinal Study on the Impact of Venture Capital Firm Heterogeneity on Portfolio Company Growth ........................................ 4 1.1.3. Study 3: Early Differences and Persistence in the Entrepreneurial Finance Process: Evidence from High- and Low-Growth Biotechnology Startups ................................................... 5 1.2. Key Dimensions of Financial Decision-Making and Foundational Finance Theories....6 1.2.1. Amount of Finance ............................................................................................................... 8 1.2.2. Type of Finance .................................................................................................................. 10 1.2.3. Source of Finance ............................................................................................................... 13 1.2.4. Dynamics ............................................................................................................................ 16 1.2.5. How the Studies in this Dissertation Cover the Different Dimensions of Financial Decision-Making .......................................................................................................................... 17 1.3. The Link between Process Theories and Foundational Finance Theories....................18 vi
1.4. Company Growth as a Complex Organizational Process: What is High Growth? What are High-Growth Companies?...........................................................................................23 1.4.1. Growth Indicators, Growth Formula and Timeframe......................................................... 24 1.4.2. How the Studies in this Dissertation Address the Multidimensional Nature of Growth .... 27 1.5. Research Context .......................................................................................................28 1.5.1. The Belgian Financial System ............................................................................................ 29 1.5.2. The Belgian Entrepreneurial Landscape............................................................................. 31 1.5.3. Implications of the Research Setting for the Studies in this Dissertation........................... 34 1.6. Data...........................................................................................................................35 1.6.1. BEL-FIRST Financial Accounts Database......................................................................... 36 1.6.2. Belgian Venture Capital & Private Equity Association (BVA) Database.......................... 38 1.6.3. Zephyr Database ................................................................................................................. 39 1.6.4. Interview data ..................................................................................................................... 41 1.7. Main Findings............................................................................................................42 1.7.1. Study 1: Incremental Finance Decisions in High-Growth Companies: Pecking Order and Debt Capacity Considerations ...................................................................................................... 42 1.7.2. Study 2: Seeking Experienced or Legitimate Partners? A Longitudinal Study on the Impact of Venture Capital Firm Heterogeneity on Portfolio Company Growth ...................................... 43 1.7.3. Study 3: Early Differences and Persistence in the Entrepreneurial Finance Process: Evidence from High- and Low-Growth Biotechnology Startups ................................................. 45 1.8. Overall Academic Contributions ................................................................................46 1.8.1. Finance Literature............................................................................................................... 46 1.8.2. Growth Literature ............................................................................................................... 51 1.9. Structure of the Dissertation.......................................................................................54 References........................................................................................................................54 Chapter 2: Incremental Finance Decisions in High-Growth Companies: Pecking Order and Debt Capacity Considerations .. 63 2.1. Abstract .....................................................................................................................64 2.2. Introduction ...............................................................................................................64 vii
Page 1 and 2: Faculty of Economics and Business A
Page 3: Financing Unquoted High-Growth Comp
Page 7 and 8: Acknowledgements This dissertation
Page 9: calls. We know everything about eac
Page 13 and 14: 3.5.3. Alternative Explanations for
Page 15 and 16: List of Tables Chapter 1 Table 1.1
Page 17 and 18: List of Figures Chapter 1 Figure 1.
Page 19 and 20: De tweede studie gaat na hoe versch
Page 21 and 22: Executive Summary High-growth compa
Page 23 and 24: development as a whole. The process
Page 25 and 26: The rest of this introduction is st
Page 27 and 28: More significantly, finance scholar
Page 29 and 30: Furthermore, in light of current fi
Page 31 and 32: 1.2.1. Amount of Finance A first di
Page 33 and 34: Empirical research confirms that co
Page 35 and 36: the static trade-off theory are onl
Page 37 and 38: track record, will heavily rely on
Page 39 and 40: 1.2.4. Dynamics Companies have to m
Page 41 and 42: focusing on the acquisition of vent
Page 43 and 44: Moreover, historical finance decisi
Page 45 and 46: I. TELEOLOGY FIGURE 1.3 Process Mod
Page 47 and 48: 1.4.1. Growth Indicators, Growth Fo
Page 49 and 50: TABLE 1.2 Overlap (%) between Diffe
Page 51 and 52: Study 1: Incremental Finance Decisi
Page 53 and 54: accessible for a limited number of
Page 55 and 56: FIGURE 1.4 Early-Stage Entrepreneur
Page 57 and 58: Overall, a low level of entrepreneu
Page 59 and 60: timeframe of the study 3 . However,
Page 61 and 62:
are collect through the financial a
Page 63 and 64:
Two drawbacks of the Zephyr databas
Page 65 and 66:
accurately remembering finance even
Page 67 and 68:
experience of venture capital firms
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founding. The increased professiona
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investments internally and not to a
Page 73 and 74:
contribute to the acquisition of ot
Page 75 and 76:
constraints (Himmelberg and Peterse
Page 77 and 78:
1.9. Structure of the Dissertation
Page 79 and 80:
Chandler G.N. and Hanks S.H. (1998)
Page 81 and 82:
Gregory B.T., Rutherford M.W., Oswa
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Manigart S., De Waele K., Wright M.
Page 85 and 86:
Van Auken H. (2001) “Financing sm
Page 87 and 88:
2.1. Abstract This study examines i
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Companies do not continuously raise
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future expansion, financial distres
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Despite contradictory empirical fin
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lowers company value and in turn in
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Hypothesis 2: High-growth companies
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had to be for at least two years am
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2.4.2. Dependent Variables: Finance
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Percentage of firms using: TABLE 2.
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Noteworthy is the high correlation
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Internal finance: TABLE 2.4 Variabl
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Internal finance: (EARNINGS/TOTAL A
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in the probability of raising exter
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Additional analyses on smaller sub-
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Our results are important for acade
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Barclay M.J., Smith Jr., C.W. and M
Page 119 and 120:
Helwege J. and Liang N. (1996) “I
Page 121 and 122:
Ou C. and Haynes G.W. (2006) “Acq
Page 123 and 124:
Chapter 3: Seeking Experienced or L
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(Rindova, Williamson, Petkova and S
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higher growth paths both in employm
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The accumulated experience may not
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offer finance by venture capital in
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around three to five years (Zarutsk
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effects of this potential confound.
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It is conceptually convenient to de
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it indicates how the mean initial s
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The results of the unconditional an
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significant quadratic trend. In thi
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exhibit steeper growth curves both
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obustness of the positive relations
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employment and intangible assets ra
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3.6. Discussion and Conclusion Most
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suggest that venture capital firms
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Baum J.A.C., Calabrese T. and Silve
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Hoang H. and Rothaermel F.T. (2005)
Page 159 and 160:
Peixoto J.L. (1987) “Hierarchical
Page 161 and 162:
Appendix 1: Robustness Check In the
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Chapter 4: Early Differences and Pe
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financial resource mobilization fro
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processes that make it difficult fo
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Biotechnology, 2002). The biotechno
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Table 4.2 differentiates between hi
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to follow-up interviews, (4) financ
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informants had difficulties in accu
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for ventures to replicate the succe
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A good illustration is the differen
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corporate investor related to a big
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In contrast to the image portrayed
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4.5.2. Initial Differences in Growt
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TABLE 4.6 Local Search and the Impa
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investors related to the venture, a
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persist across time and suggest it
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performing biotechnology parent com
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“In our venture capital firm the
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Additionally, our cases illustrate
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(Gargiulo, 1993). He approached not
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that the availability and suitabili
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and Eisenhardt, 2008). In this cont
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ventures are often depicted as pass
Page 207 and 208:
Eisenhardt K.M. (1989b) “Agency t
Page 209 and 210:
Katila R., Rosenberger J.D. and Eis
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Sorenson O. and Stuart T.E. (2001)
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Chapter 5: Limitations, Avenues for
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and despite these low leverage rati
Page 217 and 218:
Additionally, early investors may i
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5.2.1. Entrepreneurs By studying th
Page 221 and 222:
investment strategy. Given the requ
Page 223:
Lerner J. (1999) “The government
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