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Supporting the pre-commercialization stages of technology-based firms: The effects of small-scale venture capital

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  • Magnus Klofsten

Abstract

A large number of studies discuss the financing of small firms from the perspective of bank loans and different forms of venture capital. In this paper, a form of financing that is rarely touched upon in studies is discussed, namely, small-scale capital up to 500 KSEK (1 US$=7.9 SEK) that is provided in the form of soft loans or grants in the very early stages of a firm's development. Drawing upon a sample of 48 firms located in Swedish Science Parks, the authors mapped what the firms used their subsidies for (e.g. development of a business plan or a prototype and marketing). Particular emphasis was paid to the outcome of the financial support. Two main effects were found to be significant. First, the money was spent on activities that enable the companies to establish customer contacts as part of a process of successful market introduction. Second, the mere fact of selecting companies is widely regarded as an indicator of the selected companies' integrity and high potential by private investors and business partners. Thus, the reputation and network position of the young venture is leveraged.

Suggested Citation

  • Magnus Klofsten, 1999. "Supporting the pre-commercialization stages of technology-based firms: The effects of small-scale venture capital," Venture Capital, Taylor & Francis Journals, vol. 1(1), pages 83-93, January.
    • Handle: RePEc:taf:veecee:v:1:y:1999:i:1:p:83-93
    DOI: 10.1080/136910699296009
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    Cited by:

    1. DE CLEYN, Sven & BRAET, Johan, 2006. "The evolution and performance of spin-off ventures: Integration and elaboration of existing models," Working Papers 2006031, University of Antwerp, Faculty of Business and Economics.
    2. Shah Rukh Shakeel & Oskar Juszczyk, 2019. "The Role of Venture Capital in the Commercialization of Cleantech Companies," Management, University of Primorska, Faculty of Management Koper, vol. 14(4), pages 325-339.
    3. Colin Mason & Richard Harrison, 2003. "Closing the Regional Equity Gap? A Critique of the Department of Trade and Industry's Regional Venture Capital Funds Initiative," Regional Studies, Taylor & Francis Journals, vol. 37(8), pages 855-868.
    4. Hanna Rydehell, 2019. "Stakeholder Roles In Business Model Development In New Technology-Based Firms," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 24(04), pages 1-38, May.

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