The Impact of Multiple and Reputable Initial Stage Investors on Ventures Performance: Evidence From the Nordic Venture Capital Market Between 2005-2023

Abstract

This thesis investigates the influence of multiple and reputable investors in the initial funding round of Nordic startups on their subsequent performance, using a comprehensive dataset of investment transactions from 2005 to 2023. The primary objective is to extend the existing body of academic literature by exploring this relationship within the relatively under-explored Nordic startup ecosystem. Although previous research suggests a positive relationship between syndication and startup performance, regional specificities necessitate further investigation. This study, therefore, delves into the Nordic context, which has recently emerged as a significant player in the global startup arena but remains academically under-scrutinized. The research question central to this thesis is: "What is the impact of multiple and reputable investors in a startup's initial funding round on their performance?" In addressing this question, the study also considers factors such as industry sectors, time periods, and country of origin of the startups. The main findings reveal that syndicated investments in the initial round significantly improve startup performance, as measured by the number of funding rounds, the total amount raised, and the survival rate to IPO, supporting the academic consensus. However, the presence of reputable investors in the initial round is associated with significantly worse performance based on the same measures. Interestingly, the combination of syndicated and reputable investors in the initial round yields the best performance in terms of the total amount raised. The findings of this research will contribute to scholarly understanding of investment dynamics in the Nordic startup ecosystem, and provide valuable insights for practitioners in the field. By highlighting the significance of investor composition in initial funding rounds, it aims to inform investment strategies and decision-making processes for both venture capitalists and startups.