Ventureinvestorernes pre-investeringsproces: Et empirisk studie iblandt danske ventureinvestorer

Abstract

This master thesis investigates how Danish venture investors analyze the investment proposals they encounter. The focus is on investment proposals from entrepreneurial firms which provide the investors with a lot of uncertainties. The objective of this master thesis is also to make comparisons between the formal and informal Danish venture investors. The investigation is based on case studies of seven Danish venture investors. Four of which are formal investors and three who are informal investors. The investors were asked about their overall analysis strategy when investigating the investment proposals, and they were also asked to deliver examples from concrete investments. The results of the investigation point towards that the investors as a group put a lot of emphasis on several aspects about the entrepreneurial firm in their analysis. The main aspects are: the entrepreneur and his qualifications, the product and the technology, the market potential, financial needs and exit opportunities. It is important for the investors that the product or the technology has a high level of innovation which potentially can give the entrepreneurial firm a unique position in the market. In five of the seven case examples the contact between the investor and the entrepreneurial firm has been established through network contacts, which suggests that the investors have a preference for entrepreneurial firms who have come to their attention through this source. Especially in their screening process the investors also puts a lot of emphasis on the investment proposals’ financial needs and whether or not the proposal fits the investors’ strategy. During the pre-investment process1 the investors do not make any predictions about the investment proposals value using the recognized valuation models such as the DCF-model, multiples etc. The reason for this is that the future profits and cash flows of these entrepreneurial firms is too uncertain to be predicted and that they have no or little historical financial records. Instead all seven investors try to find comparable deals concerning similar firms and at least one of the investors use some “homemade”-models to make the valuations. Because of these difficulties the investors to a great extend rely on their gut feeling and dialogue with for example trade experts, potential customers etc. The investigation has unveiled a few differences between the formal and informal investors. The most noticeable of these differences is that the formal investors use considerably more resources during their due diligence. The investigation also suggests that the formal investors use more extensive investment agreements and receives more investment proposals then the informal.