International Journal of Nonlinear Analysis and Applications

Identifying and ranking qualitative and quantitative factors of influential venture capital on optimizing the capital structure of knowledge-based companies

Document Type : Research Paper

Authors

1 Department of Management, Dehagan Branch, Islamic Azad University, Dehagan, Iran

2 Department of Management, Mobarakeh Branch, Islamic Azad University, Mobarakeh, Iran

Abstract

Venture capital is a type of investment in which individuals or companies invest in newly established or start-up projects in order to obtain higher profits in exchange for higher risk. Considering the role of this type of investment in financing and designing the optimal capital structure of knowledge-based companies and helping their growth and development, the purpose of this research is to identify and rank the quantitative and qualitative factors of venture capital effective in optimizing the capital structure of knowledge-based companies. For this purpose, with the help of simple random sampling and using Cochran's sampling formula, 150 managers of knowledge-based companies were selected as sample members. In order to identify the quantitative and qualitative factors of acceptable Venture capital, after referring to the research background and interviewing the experts, using the researcher-made questionnaire tool, and then factor loading of the mentioned factors through specific confirmatory factor analysis and finally the factors identified by ANP ranking method were classified. The results showed that technological factors, environmental factors, corporate indicators and management factors as the most important qualitative factors, and financial indicators can be listed as the most important quantitative factors in venture capital effective in optimizing the capital structure of knowledge-based companies. Among the identified factors, managerial factors have the highest rank, and the last rank belongs to technological factors. It was also determined that among the sub-components of these factors, the ability to establish effective communication, the experience of the management team, and the good reputation and ability of the management staff have the first to third ranks of the final weights. From the point of view of the respondents, corporate indicators have gained second importance, followed by financial indicators.

Keywords

[1] M. Banayi Shahani, H. Adab, Hossein and M.R. Banayi Shahani, Investigating the role of venture capital funds in the development of knowledge-based companies, 2nd Int. Conf. Manag. Dev. Culture, Tehran, 2015.
[2] J. Behrens, H. Patzelt, L. Schweizer and R. Burger, Specific managerial human capital, firm age, and venture capital financing of biopharmaceutical ventures, J. High Tech. Manag. Res. 23 (2012), no. 2, 112–121.
[3] A. Bergek and C. Norrman, Integrating the supply and demand sides of public support to new technology-based firms, Sci. Public Policy 42 (2014), no. 4, 514–529.
[4] L. Brinster and T. Tykvov´a, Connected VCs and strategic alliances: Evidence from biotech companies, J. Corporate Finance 66 (2021), 10183.
[5] H. Chen, P. Gompers, A. Kovner and J. Lerner, The geography of venture capital, J. Urban Economics, 67 (2010), no. 1, 90–102.
[6] C. Cheng, Y. Hua and D. Tan, Spatial dynamics and determinants of sustainable finance: Evidence from venture capital investment in China, J. Cleaner Product. 232 (2019), no. 20, 1148–1157.
[7] H. Chitsazan, M. Rezvani and R. Bafekrdoost Abad, Identifying and ranking the factors affecting the valuation of new businesses by venture investors, Entrepreneur. Dev. 8 (2015), no. 4, 591–609.
[8] S. Derakhshan and P. Mohammadi, Prioritizing influential factors on the evaluation of venture capital plans, Innov. Manag. 3 (2014), no. 4.
[9] W. Drover, M.S. Wood and Y. Fassin, Take the money or run? Investors’ ethical reputation and entrepreneurs’ willingness to partner, J. Bus. Ventur. 29 (2014), no. 6, 723–740.
[10] D. Engel and M. Keilbach, Firm-level implications of early stage venture capital investment, J. Empir. Finance 14 (2007), no. 2, 150–167.
[11] R. Estiri, Financing newly established knowledge-based companies by creating a venture capital fund, Pardis Technol. Park 6 (2009), no. 19.
[12] A.P. Faria and N. Barbosa, Does venture capital really foster innovation?, Econ. Lett. 122 (2014), no. 2, 129–131.
[13] V. Farmanara, Investigating the relationship between asymmetric information and managerial authority by financing and capital in companies listed on Tehran stock exchange, Financ. Econ. Quart. 12 (2017), no. 43, 209–232.
[14] G. Foroghi Nematollahi and M. Farrokhnia, Presenting the model prioritizing of effective factors in the decisionmaking process of venture capital using DEMATEL method (case study: Navy growth center), Int. Conf. Appl.
Res. Manag. Industr. Eng., Tehran, 2018.
[15] H. Ghazanfari, S. Khodadad Hosseini, A. Kordanaij and A. Azar, Corporate venture capital investment model in IT companies, Strategic Manag. Thought 13 (2019), no. 1, 255–293.
[16] S. Ghazi Nouri, J. Bamdadsofi and N. Redai, The framework for choosing financing tools is based on the clustering of knowledge-based companies, Sci. Technol. Policy 9 (2016), no. 2, 13–30.
[17] P.A. Gompers and J. Lerner, The venture capital cycle, MIT Press, Cambridge, MA, 2004.
[18] M. Karimkhani, K. Pakizeh and M. Akhavan Anvari, Ranking of factors affecting the innovation of venture capital companies from the perspective of venture capitalists (case study: Venture capital funds and accelerators), Entrepreneur. Dev. 10 (2017), no. 4, 655–674.
[19] M. Kaviyani, D. Sharifi Limaei and R. Yazdani, An overview of financing methods in newly established companies (start-ups), Nat. Entrepreneur. Conf., Chalous Branch, Islamic Azad University, 2014.
[20] M. Minyi and F. Samadi, The effect of venture capitalists and bank loans on the performance of small and medium enterprises, Bus. Manag. 13 (2021), no. 49, 405–431.
[21] S. Mishra, Venture capital investment choice: Multicriteria decision matrix, J. Private Equity 20 (2017), no. 2, 52–68.
[22] D. Monika and K.S. Anil, Identification and prioritization of factors affecting venture capitalists’ investment, J. Small Bus. Enterprise Dev. 23 (2016), no. 4, 964–983.
[23] M. Motevasseli, S. Shojaei, H. Chitsazan and Q. Mohammadi Elyasi, Institutional barriers to venture capital investment in Iran: A study to analyze investment motivations in small technology companies, Entrepreneur. Dev. 10 (2018), no. 3, 477–496.
[24] A. Nemati, G. Amanverdi, A. Baghani; R. Darabi and N. Noorollahzadeh, A comparative study of the effect of capital structure on the profitability of companies listed on the Tehran stock exchange with southeast Asian countries based on the threshold panel regression approach, Financ. Account. Audit Res. 11 (2019), no. 42, 123–158.
[25] G. Nguyen and V. Vo, Asset liquidity and venture capital investment, J. Corporate Finance 69 (2021),  101963.
[26] N. Nigam, C. Benettia and S. Johan, Digital start-up access to venture capital financing: What signals quality?, Emerg. Markets Rev. 45 (2020), 100743.
[27] D. North, D. Smallbone and I. Wickers, Public sector support for innovating SMEs, Small Bus. Econ. 16 (2001), no. 4, 303–317.
[28] K. Palizdar, S. Madani and M. AsgariNia, Investigating behavioral and environmental factors affecting the attraction of venture investors to invest in knowledge-based companies (case study: Biotechnology industry in Iran), Policy Mack. Econ. Progr. 6 (2018), no. 1.
[29] M. Poorzarandi and M. Shahriyari, Designing a comprehensive venture capital model, Financ. Eng. Secur. Manag. (Portfolio Management) 6 (2015), no. 24, 63–71.
[30] M. Rostami and M. Seighali, Risk reward; Practical basics of risky capital, Publications of Tehran Stock Exchange, 2011.
[31] R. Rostamzadeh, K. Ismail and E.K. Zavadskas, Multi criteria decision making for assisting business angels in investments, Technol. Econ. Development Econ. 20 (2014), no. 4, 696–720.
[32] A.M. Saadatnezhad, T. Sohrabi, A. Toloui Ashlaghi and N. Shadnoush, The effective executive model of technological venture capital strategy (case study: Ayandeh bank), Financ. Eng. Secur. Manag. 45 (2020), no. 45,
247–267.
[33] F. Sardo, Z. Serrasqueiro and E. Felix, Does venture capital affect capital structure rebalancing? The case of small knowledge-intensive service firms, Struct. Change Econ. Dyn. 53 (2020), no. 12, 170–179.
[34] Y. Shao and L. Sun, Entrepreneurs’ social capital and venture capital financing, J. Bus. Res. 136 (2021), 499–512.
[35] S. Sojoodi, P. Mohammadzadeh and A. Fateh, Investigating the effect of financing from venture funds on the profitability of knowledge-based companies, Sci. Technol. Policy 13 (2020), no. 2, 29–40.
[36] R. Tehrani and S. Najafzadeh Khoei, Investigating the effect of inflation uncertainty on the capital structure of companies listed on the Tehran stock exchange, Financ. Econ. 11 (2017), no. 38, 1–20.
[37] K. Titvack, Emerging markets clean up their act, J. Euromoney 37 (2006), no. 44, 158–160.
[38] S. Wang, T. Wareewanich and T. Chankoson, Factors influencing venture capital performance in emerging technology: The case of China, Int. J. Innov. Stud. 7 (2022), no. 1, 18–31.
[39] W.A. Wells, Venture capital decision-making, Carnegie Mellon University, 1974.
[40] J. Wonglimpiyarat, Exploring strategic venture capital financing with Silicon Valley style, Technol. Forecast. Soc. Change 102 (2016), 80–89.
[41] T.I.A.N. Xiaoli, K.O.U. Gang and W. Zhang, Geographic distance, venture capital and technological performance: Evidence from Chinese enterprises, Technol. Forecast. Soc. Change 158 (2020), 120155.
[42] C. Xue, P. Jiang and X. Dang, The dynamics of network communities and venture capital performance: Evidence from China, Finance Res. Lett. 28 (2019), 6–10.
[43] N. Yaghoubi and N. Ghiyasi, Driving forces and factors influencing the attraction of venture capitalists in the development of start-up businesses and knowledge-based companies, Nat. Conf. Econ. Dev. Manag. Entrepreneur. Support Iran. Goods, Zahedan, 2019.
International Journal of Nonlinear Analysis and Applications
Volume 14, Issue 11
November 2023
Pages 257-270
  • Receive Date: 15 October 2022
  • Revise Date: 10 December 2022
  • Accept Date: 19 December 2022