Identifying and Ranking Negotiable Items with Startups from Venture Capitalists' Perspective
Subject Areas : Entrepreneurship and Innovation Ecosystems
Rahi Zandifar
1
*
,
DANIAL DANA
2
1 - Master of Economics, Shahid Beheshti University
2 -
Keywords: venture capital, startup, entrepreneur, negotiation, investment,
Abstract :
Venture capital is a tool for funding innovative and knowledge-based companies. The degree of importance that venture capitalists place on negotiable items is one of the challenges associated with this type of investment. Furthermore, investors' flexibility is a crucial component of the VC investment process. The purpose of this research was to identify and rank what venture capitalists consider negotiable with startups. For this purpose, the negotiable items were identified through a literature review and then the validity of the questionnaires was evaluated and approved by experts. Consequently, the data of 26 experts in the field of the venture capital industry in Iran is collected through two questionnaires on a 5-point Likert scale. Reliability was determined using Cronbach's alpha. Therefore, the research method was a descriptive survey based on the nature and data collection, and in terms of purpose, it was a practical development. Finally, the data were analyzed and ranked using multi-criteria decision-making algorithm (Shannon’s entropy and TOPSIS) based on the degree of importance and flexibility attributes. According to the findings of this study, these negotiable items fell into the descending order based on two criteria including importance and flexibility: preferred stock, board control (control rights), pro-rata rights, investment amount, valuation, performance indicator, liquidation preference rights, ownership stake, information rights, vesting, anti-dilution rights, tag-along rights, drag-along rights, option pool, dividends, participation rights, pay to play provisions and redemption rights (repurchase rights).
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