DETERMINANTS OF
SUCCESS IDENTIFIED
WITHIN THE DUTCH
INTERNET START-UP
LIFECYCLE
Thesis marketing innovation and entrepreneurship
MSC Business Administration – Track Marketing
University of Amsterdam
Student: Lisanne Bakker
Studentnumber: 11148233
Supervisor: T. Paffen
Date: 19th of August 2016
1 Table of contents Statement of originality 4 Abstract 5 1. Introduction 6 1.1 Topic of interest 6
1.2 Defining the research gap 7
1.3 Managerial implications 8 1.4 Research question 9 1.5 Research scope 10 1.6 Thesis outline 10 2. Literature review 10 2.1 General definitions 11 2.2 Definition entrepreneurship 12
2.3 Definition business success 13
2.4 Indicators for success from a venture capitalist perspective 15 2.5 Determinants for internet start-up success based on the entrepreneurial team 16 2.6 The four stages of the internet start-up lifecycle 23
2.7 Determinants internet start-up lifecycle 24
2.8 Conceptual framework 25
2.9 Contributions of this chapter to the research question and its sub questions 28
3. Method 32
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3.2 Qualitative data method 33
3.3 Quantitative data method 34
3.4 Sample 34 3.5 Measures interview 36 3.6 Procedures interview 37 3.7 Analysis interview 38 3.8 Measures survey 38 3.9 Procedures survey 41 3.10 Analysis survey 42 4. Results 44 4.1 Interviews 44 4.2 Survey 56
5. Discussion and conclusion 64
6. References 72
7 Appendix 78
A. Summary determinants internet start-up success 78
B. 1. Interview questions entrepreneur 79
2. Interview question VC/ accelerator/ professional
C. Survey questions 92
D. Coding interviews 102
E. Results interviews 116
F. Results survey sample 123
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H. Confirmatory factor analysis after removing strange items 132
I. Reliability analysis 138
J. Descriptive statistics 149
K. Two way repeated measure ANOVA 150
L. Explorative analysis descriptive statistics items for each item individual 160 M. Visualization descriptive statistics individual items 158
4 Statement of originality
This document is written by Student Lisanne Bakker who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
5 Abstract
The internet industry today is the driving force of economic growth and job creation. Several researches focus on success factors and failure factors of new ventures. Still a lot of
vagueness is involved within this subject. This research has identified the key determinants of internet start-up success with a focus on the entrepreneurial team in general and among the different stages of the internet start-up lifecycle. The method used within this research is a mixed method. A conceptual framework is constructed and validated by using two types of data gathering, qualitative data via interviews and quantitative data via a survey. Existing literature does not offer that much insights based on internet start-ups while they are the future. This research tries to offers these insights. In general, the constructs internal
characteristics and prior experiences are significantly perceived important for internet start-up success. The determinants internal characteristics of the entrepreneurial team are significantly perceived as more important for internet start-up success than external characteristics and prior experiences. Among the lifecycle stages, internal characteristics are perceived as very important among all stages of the internet start-up lifecycle. Prior experiences are perceived as more important among each subsequent stage compared to the previous stage of the internet start-up lifecycle.
6 1. Introduction
1.1 Topic of interest
The trend of the moment regarding new ventures is the internet start-up. The internet today is the driving force of economic growth and job creation. Unicorns and scale-ups, they are the future. In this rapidly growing disruptive industry, starting a successful internet start-up might look very easy but statistics show that it can be really hard. The risks are very high combined with the failure rates. According to the article of Praag et al. (2003), only 50% survives after 3 years. According to the article of Song et al. (2008), between 1991 and 2000, 21,9 % of the established new technology ventures in the United States survived after five years (Song et al., 2008). This information is based on only two examples of more studies conducted to identify the survival rate in this internet start-up industry. The internet sector becomes to shift from an emerging industry to a major growth industry and attend to be an important place in the contemporary knowledge based economy. The internet sector has grown enormously and a world without ICT has become unimaginable. Given the fact that most start-ups fail, it does not stop the internet entrepreneur to give it a shot. This could be, because of the easiness to start an internet start-up because you only need a great idea to enter or create a market and moreover, the start-up costs are often very low. The internet start-up life cycle goes most of the time extremely fast (Drori et al. 2009). Literature shows that lifecycle models exists of a predetermined sequence of stages, and viewed as a linear progression, while each stage of the lifecycle exists of different determinants that can influence the success of the internet start-up (Berman, 2011). Given the high failure rate of new ventures, it is important to identify the determinants of success among the different life cycle stages. The current literature, however, does not offer that much consistent insight. Many studies focus on success factors for new ventures, but the empirical results are often contrary and fragmented ((Cressy 1996; Sorensen and Chang 2006; Lasch et al. 2007; Song et al. 2008; Lussier and Halabi 2010). Within this
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important, rapidly growing industry, there is still a lot of vagueness involved. Therefore, the focus of this research will be on internet start-ups with a focus on the entrepreneurial team. The entrepreneurial team plays a critical role regarding the success of an internet start-up. The entrepreneurial team starts the business, gathers resources, and develops strategies and ideas to get a product or a service successful in the market. To narrow down this broad research area the focus will be on the key determinants of success among the Dutch internet start-up lifecycle. Also within the Netherlands the internet start-up sector is rapidly growing and also over here, internet start-ups are booming. For example, in 2013, 123000 Dutch start-ups started their businesses (Stolk, 2013). Yet, little researches from the Netherlands focused on the determinants of internet start-up success. Due to accessibility and high relevance, the focus of this research will be Dutch internet start-ups, using broader literature as a starting point.
1.2 Defining the research gap
There is no guideline to become a successful internet start-up. There are several determinants valued by entrepreneurs that play an important role to become successful. In successful cases, determinants are described as success factors, and in unsuccessful cases, determinants are described as failure factors. Although many research approaches are original, results are often controversial and fragmented. Some articles show overlap between research approaches, but most of the time the results differ and therefor, a lot of research still needs to be done. In most cases, internet start-ups fail whereas they maybe could have survived if they were better informed about the determinants of success. The research field is relatively young and research is needed in order to understand the determinants of internet start-up success among the different stages of the internet start-up lifecycle. This research will identify the
determinants of internet start-up success in two ways. First, there will be a focus on identifying the determinants of success in general. After that, there will be a focus on
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identifying the determinants of success among the different stages of the Dutch internet start-up life cycle. Every start-start-up starts at one point and goes through different phases, which can also be defined as the internet start-up life cycle. Each phase in the internet start-up life cycle is different and comes with different understandings. The most articles regarding this research subject only focus on the determinants of success or failure. To make this research more interesting and more relevant for the research field the key determinants of success will be identified among each subsequent stage of the internet start-up lifecycle. Thereby this research will be the first research that specifically investigates the key determinants among each subsequent stage of the internet start-up lifecycle.
1.3 Managerial implications
The right focus will help all entrepreneurs effectively in order to build a successful and sustainable internet start-up that is able to deal with problems that may occur at hand. Every internet start-up that is following the path of its lifecycle to success is facing problems. Some are able to deal with it and some are not. The ones who are able to deal with it, probably become successful whereas some others may fail and are probably unsuccessful. These problems can be defined as critical determinants that are influencing internet start-up success. It is important to find out what determinants are perceived as most important for internet start-up success in general and among the different stages of the internet start-start-up lifecycle. This research assumes that when the successful determinants of the entrepreneurial team are known, entrepreneurs and venture capitalist can make a better prediction about whether their individual business case has potential to become successful. In order to that, entrepreneurs can focus on the key determinants perceived as most important to go successfully from stage to stage and grow a sustainable business. The aim of this research is to give the reader more insights into the determinants of internet start-up success and identify which determinants are valued as most important by entrepreneurs, VC’s, accelerators and professionals in becoming
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successful in general and among the different stages of the Dutch internet start-up life cycle with a focus on the entrepreneurial team.
1.4 Research question
Regarding the introduction, the research gap and the managerial implications, the following research question can be formulated: ‘Which determinants of the entrepreneurial team are
perceived important for internet start-up success in general – and which determinants of the entrepreneurial team are perceived as most important for internet start-up success among the different stages of the internet start-up lifecycle?’
The research question can be divided into the following sub questions:
1: Which definitions of entrepreneurship are given in the existing literature? In addition, which of them is most suitable for internet start-ups?
2: Which definitions of success are given in the existing literature? In addition, which of them is suitable for internet start-ups?
3: What are the determinants of internet start-up success based on the entrepreneurial team?
4: What are the determinants of the different stages of the internet start-up lifecycle?
5: Which determinants of the entrepreneurial team are perceived as most important for internet start-up success in general?
6: Which determinants of the entrepreneurial team are perceived as most important for internet start-up success among the different stages of the internet start-up lifecycle?
This research will conduct qualitative and quantitative data in order to answer the research question and its sub questions. Entrepreneurs of several internet start-ups, entrepreneurship professionals, venture capitalists and accelerators will be interviewed. After that, a survey will
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be distributed among entrepreneurs and professionals to be able to test hypotheses and answer the research question.
1.5 Research scope
The industry chosen within this research is the internet start-up sector. This research focuses on the success factors of the entrepreneurial team and the four stages of internet start-up lifecycle. To narrow down this broad research area the focus will be on Dutch internet start-ups. Little is known about the Dutch internet start-up industry and therefor it will be
interesting to find out what entrepreneurs, venture capitalists, accelerators and internet start-up professionals value as important determinants for internet start-start-up success in general and among the four stages of the internet start-up lifecycle.
1.6 Thesis outline
This thesis consists of six parts: An introduction, a theoretical framework, a method section, a results section, a discussion and finally a conclusion. First, the literature will be reviewed and investigated to find out what the determinants of internet start-up success in general are. Second, a conceptual framework will be constructed from the findings of the literature. The conceptual internet start-up framework will be used to show how the several constructs are related to each other. After that, the method part of the thesis will be described. Qualitative data will be gathered via interviews in order to validate the conceptual internet start-up framework and to be able to formulate hypotheses. Quantitative data will be gathered via a survey in order to test the hypotheses. The results of the interviews and the survey will be given in the results part of this thesis. After that, the results will be discussed in the discussion part and finally conclusions will be drawn in the conclusion part of this thesis.
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In this section several definitions of entrepreneurship and success will be given. Indicators for internet start-up success will be summed up from a venture capitalist perspective; the
determinants of internet start-up success will be defined based on previous literature; the stages and the characteristics of the internet start-up lifecycle will be defined and described based on previous literature; a conceptual model will be designed and finally the contributions of this section will be clarified by providing answers to several sub questions.
2.1 General definitions
Business model: a model that is developed in order to create a sustainable business. It needs to
be defined at the beginning and its purpose is to generate revenues.
Entrepreneur: a person who establishes, organizes and manages any enterprise, especially a
business under conditions of extreme uncertainty and risk.
Internet startup: is a starting (product) software company that provides a service via internet
to people to solve a certain problem within the market.
Internet start-up life cycle: a path that must be taken in order to grow and become a mature
internet firm.
Determinant: a circumstance or influence, that brings about a certain effect, in this case,
contributes to success.
Founder: the entrepreneur who started a business, in this case started an internet start-up.
Startup stage: a phase that internet startups go through during the startup life cycle in order to
grow.
12 users of the service the internet startup provides.
2.2 Definition of entrepreneurship
Joseph Schumpeter (1911), was mainly important for the present discipline of
entrepreneurship. Based on Schumpeter’s work, many different entrepreneurship definitions have been generated. The most of these definitions consists of the following elements: 1) identification of entrepreneurial opportunities, 2) innovation and novelty, 3) securing of resources and formation of an enterprise/ an organisation, and 4) profit-orientation taking into account reasonable risks and uncertainties (Volkman et al, 2010). Examples of several
entrepreneurship definitions are:
“An entrepreneur is an innovator who implements entrepreneurial change within markets, where entrepreneurial change has five manifestations: 1) the introduction of a new/improved good; 2) the introduction of a new method of production; 3) the opening of a new market; 4) the exploitation of a new source of supply; and 5) the carrying out of the new organization of any industry” (Schumpeter, 1934).
“Entrepreneurship is the combination of a context in which an opportunity is situated, a set of personal characteristics are required to identify and pursue this opportunity, and the creation of a particular outcome” (Roger et al., 2007).
“Entrepreneurship is a way of thinking, reasoning, and acting that is opportunity obsessed, holistic in approach and leadership balanced” (Timmons & Spinelli, 2008).
“Entrepreneurship is the process of creating something of value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence” (Hisrisch &
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“Entrepreneurship is a context dependent social process through which individuals and team create wealth by bringing together unique packages of resources to exploit marketplace opportunities.” (Ireland et al., 2001).
The definition of entrepreneurship, which will be used within this research, is from Hirisch & Peters, (2002).
“Entrepreneurship is the process of creating something of value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence” (Hisrisch &
Peters, 2002).
2.3 Definition business success
Regarding the literature, internet start-up success can be defined in many different ways. Success can be seen as a multidimensional construct which is determined by financial and operational performance. Indicators of financial performance over here reflect a company’s economic performance while indicators of operational performance can affect financial performance (Hill, 2013; Combs et al., 2005; Venkatraman & Ramanujam, 1986). Regarding to Stuart et al. (1987), definitions of success can be categorized in four dimensions which are 1) Subjective versus objective. Initial studies classified innovations as successful or unsuccessful. 2) Bimodal, multimodal versus continuous. Later studies included various degrees of success or lack of success. Other studies use continuous variables such as sales growth, time period to positive cash flow, return on investment or equity, etc. 3) Financial versus nonfinancial. Financial measures are easily identifiable, while nonfinancial measures range from increase in employment to contributions to society, or to the learning process of the firm. 4) Meeting or not meeting expectations. Finally, success can be defined as meeting expectations (Stuart et al., 1978).
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Regarding to Kiviluto (2013), previously, entrepreneurship research focused on the financial performance of a company or the achievement of a firms’ growth as a determinant of business success (Kiviluto,2013). Recent studies today criticize this suggested positive
relationship between sales growth and success. They indicate that not the achievement of growth but the achievement of profitable growth should be regarded as business success (Brannback, et al., 2010; Davidsson et al, 2009; Kiviluto, 2013). Recent entrepreneurship research tried to connect entrepreneurship with the field of production theory to measure operational performance (Fried & Tauer, 2015). They state that a production function approach that relies on the idea that a firm changes inputs into outputs.
“The more outputs a firm produce with fewer inputs, the more successful the entrepreneurial team will be” (Fried & Tauer, 2015).
“Besides the fact that a successful firm should produce satisfying levels of outputs in
comparison to the level of inputs in the process, satisfaction about the business or feelings of satisfaction could also be regarded as business success” (Hill,2013).
The actual start of business activities is regarding to Kessler et al (2012) an indicator for business success.
“Founding success is defined as the actual start of business activities (first sales revenues), while new venture survival is defined as the existence of the venture over a certain period of time after the actual start of the business” (Kessler et al. 2012).
However, this way of focusing purely on the duration that a venture exists has little to do with success for internet start-ups. Firms that exists are not necessarily successful and a large part of the business dissolutions are voluntary instead of mandatory caused by business failure (Van Praag, 2003).
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“Business success or entrepreneurial success is whether a firm can stay in business without the necessity of a compulsory exit” (Van Praag, 2003).
“Start-up success is not a predetermined function of opportunity identification and the ‘right idea’; rather, such success is the result of a very dynamic process of business model iteration and validation” (Spiegel et al., 2015).
Within this research a combination of the suitable definitions will be used. Business success can be defined as:
“The ability to go through a dynamic process of business model iteration and validation whereby the entrepreneur or other key actors being satisfied about the levels of outputs in comparison to the inputs derived within this process” (Friend & Tauer, 2015; Hill, 2013;
Spiegel et al., 2015).
2.4 Indicators for success from a venture capitalist perspective
Regarding Golden Egg Press start-up success means being ‘investor ready’. They came up with seven criteria which are important to determine success from an investor perspective. These indicators are 1) team, 2) execution, 3) growth, 4) market opportunity, 5) value proposition, 6) competitive edge, 7) investment opportunity (Mensink, 2010).
The team needs to have deep domain knowledge, prior experience, need to be fully committed to the business. All areas of expertise should be present within the start-up team.
Execution, involves having the right ambition, vision and mind set. Besides, there should be a sound strategy (go-to-market) which the team can execute. The team should also be able to identify and manage risks that they will face.
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Growth, involves a high growth which means the potential to expand international. Besides, the business model needs to be scalable.
Market opportunity, involves being able to define a clear, large target market which has large growth potential.
Value proposition, includes a strong need for the customer or a solution for a problem. The value proposition should be clear and compelling and covering market demand. Competitive edge, should involve a value proposition, which is superior and
protectable from and towards competitors. Besides, the start-up should be able to obtain an attractive position in the value chain.
Investment opportunity involves credibility of financials and is backed by
assumptions. Moreover, the financial outlook of the venture should be attractive and there is exit potential.
These criteria and their relative importance are based on research about venture capitalists’ product and market related investment criteria (Mensink, 2010).
2.5 Determinants for internet start-up success based on the entrepreneurial team
Different researches have been performed in order to identify the determinants of success with a focus on the entrepreneurial team. Within this paragraph the identified determinants from several articles will be demonstrated and explained. The articles found within the existing literature didn’t specifically investigate internet start-ups, their focus is more on start-ups in general. It is interesting to find out whether these determinants of the entrepreneurial team are also positively influencing internet start-up success. All articles investigated start-ups within different countries.
Race
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perceived here as being a minority group. An article investigated whether race influences start-up success. The results from Cooper et al., (2004), show that minority groups were less likely to become successful than others. This means that the determinant race influences start-up success.
Gender
The existing literature investigated the determinant gender. Several articles investigated whether being a male or female influences start-up success. The results from Van Gelderen et al., (2001) and Bosma, (2004), show that male entrepreneurs were significantly found more likely to be successful than female entrepreneurs. This means that the determinant gender influences start-up success.
Creativity
The existing literature investigated the determinant creativity. An article investigated whether being a creative entrepreneur influences start-up success. The results from Kataki, (2003), show that creative entrepreneurs are found more likely to be successful than uncreative entrepreneurs. This means that creativity positively influences start-up success.
Ability to learn from the best practice
The existing literature investigated the determinant ability to learn from the best practice. This means that entrepreneurs are able and willing to learn from other successful start-ups. Several articles investigated whether being able to learn from the best practice influences start-up success. The results from, Berman, (2011) and Lussier & Halabi, (2010) show that the ability to learn from the best practice positively influences start-up success. This means that
entrepreneurs who are able to learn from the best practice are more likely to be successful than entrepreneurs who are not able to learn from the best practice.
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Capability to act on feedback
The existing literature investigated the determinant capability to act on feedback. Several articles investigated whether being capable to act on feedback influences start-up success. The results from Kataki, (2003) and Berman, (2011), show that capability to act on feedback positively influences start-up success. This means that entrepreneurs who are capable to act on feedback are more likely to be successful than entrepreneurs who are not capable to act on feedback.
Ability to track customer data
The existing literature investigated the determinant ability to track customer data. An article investigated whether the ability to track customer data influences start-up success. The results from Mensink, (2010), show that the ability to track customer data positively influences start-up success. This means that entrepreneurs who are able to track customer data are more likely to be successful than entrepreneurs who are not able to track customer data.
Education level
The existing literature investigated the determinant education level. Several articles
investigated whether education level influences start-up success. The results from Lee & Lee, (2006); Lussier & Halabi, (2010); Sorensen & Chang, (2006); Bosma, (2004); Cooper et al., (2004), and Nielsen, (2015), all show that education level positively influences start-up success. This means that entrepreneurs with higher level of education are more likely to be successful than entrepreneurs with lower level of education. The results from Hessel et al., (2010) differ. They show that entrepreneurs with medium level of education are more likely to be successful than entrepreneurs with higher level of education.
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The existing literature investigated the determinant personal investment. This means investing time and money in the start-up. An article investigated whether personal investment
influences start-up success. The results from Duchesneau & Gartner, (1990), show that
personal investment positively influences start-up success. This means that entrepreneurs who are personally investing time and money in their start-up are more likely to be successful than entrepreneurs who are not personally investing time and money.
Need for achievement and motivation
The existing literature investigated the determinant need for achievement and motivation. Need for achievement and motivation means that the entrepreneur is willing to build a career, willing to achieve something in life. Several articles investigated whether the need for
achievement and motivation influences start-up success. The results from Lee & Lee, (2006) and Hessel et al., (2010), show that need for achievement and motivation positively influences start-up success. This means that entrepreneurs who have a high need for achievement and motivation are more likely to be successful than entrepreneurs who do not have a high need for achievement and motivation.
Vision
The existing literature investigated the determinant vision. Vision means providing a clear description of what the start-up would like to achieve. An article investigated whether a clear vision influences start-up success. The results from Mensink, (2010), show that a clear vision positively influences start-up success. This means that entrepreneurs who have a clear vision are more likely to be successful than entrepreneurs who do not have a clear vision.
Mind-set
The existing literature investigated the determinant mind-set. Mind-set means having the right, positive focus. An article investigated whether a positive mind-set influences start-up
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success. The results from Mensink, (2010), show that a positive mind-set positively influences start-up success. This means that entrepreneurs who have a positive mind-set are more likely to be successful than entrepreneur who do not have a positive mind-set.
Decision making
The existing literature investigated the determinant decision making. An article investigated whether decision making influences start-up success. The results from Mensink, (2010), show that decision making positively influences start-up success. This means that entrepreneurs who are good in decision making are more likely to become successful than entrepreneurs who are not good in decision making.
Ability to work hard
The existing literature investigated the determinant ability to work hard. Several articles investigated whether the ability to work hard influences start-up success. The results from Duchesneau & Gartner, (1990); Bosma et al., (2004); Mensink, (2010); Gelderen et al., (2001); Schutjens & Wever (2000) show that the ability to work hard positively influences start-up success. This means that entrepreneurs who are able to work hard are more likely to be successful than entrepreneurs who are not able to work hard.
Ability to reduce risks
The existing literature investigated the determinant ability to reduce risks. Several articles investigated whether the ability to reduce risks influences start-up success. The results from Duchesneau and Gartner, (1990); Lee & Lee, (2006) and Van Gelderen et al., (2001), show that the ability to reduce risks positively influences start-up success. This means that
entrepreneurs who are able to reduce risks are more likely to be successful than entrepreneurs who are not able to reduce risks.
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Size start up team
The existing literature investigated the determinant size of the start-up team. Several articles investigated whether the size of the founding team influences start-up success. The results from Song et al., (2008); Lasch et al., (2007); Berman (2011) and Nielsen (2015), show that the size of the start-up team positively influences start-up success. This means that a
entrepreneurial team existing of more than one founder will likely be more successful than a solo founder.
Entrepreneurial parents
The existing literature investigated the determinant entrepreneurial parents. An article investigated whether having entrepreneurial parents influences start-up success. The results from, Duchesneau & Gartner, (1990) show that having entpreneurial parents positively influences start-up success. This means that entrepreneurs who have entrepreneurial parents are more likely to be successful than entrepreneur who do not have entrepreneurial parents.
Helpful mentors
The existing literature investigated the determinant helpful mentors. Several articles
investigated whether helpful mentors influences start-up success. Helpful mentors are coaches or professionals giving advice. The results from, Lussier & Halabi, (2010); Duchesneau and Gartner (1990); Sahlman, (1990); Berman, (2011), show that the use of helpful mentors is positively influencing start-up success. This means that entrepreneurs who make use of helpful mentors will more likely be successful than entrepreneurs who will not make use of helpful mentors.
Industry experience
The existing literature investigated the determinant industry experience. Several articles investigated whether industry experience influences start-up success. The results from Van
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Gelderen et al., (2006); Hessel et al, (2010); Song et al., (2008); Sorensen & Chang (2006), Kataki, (2003), Bosma (2004); Cooper et al., (2004); Mensink, (2010) and Nielsen, (2015), show industry experience positively influences start-up success. This means that
entrepreneurs who have prior industry experience are more likely to become successful than entrepreneurs who do not have prior industry experience.
Entrepreneurial experience
The existing literature investigated the determinant entrepreneurial experience. Several researches investigated whether entrepreneurial experience influences start-up success. The results from Song et al., (2008); Duchesneau & Gartner, (1990); Suart & Abetti, 1990; Sorensen & Chang, (2006), show that entrepreneurial experience positively influences start-up success. This means that entrepreneurs who have prior entrepreneurial experience are more likely to be successful than entrepreneurs who don’t have prior entrepreneurial experience. The results from Van Gelderen et al., (2001) show that entrepreneurial experience is not influencing internet start-up success.
Marketing experience
The existing literature investigated the determinant marketing experiences. A research
investigated whether marketing experience influences start-up success. The results from Song et al (2008), show that marketing experience is positively influencing start-up success. This means that entrepreneurs who have prior marketing experience are more likely to be successful than entrepreneurs who do not have prior marketing experience.
Managerial experience
The existing literature investigated the determinant managerial experience. Several researches investigated whether managerial experience influences start-up success. The results from Sorensen & Chang (2006); Duchesneau and Gartner (1990); Kataki, (2003), show that
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managerial experience is positively influencing start-up success. This means that
entrepreneurs who have prior managerial experience are more likely to be successful than entrepreneurs who do not have prior managerial experience. The results from Van Gelderen et al., (2001), show that managerial experience is not influencing managerial experience.
The determinants of the entrepreneurial team are now identified. Some determinants are investigated in more researches than others. Some determinants show overlap in outcome and some show contradictions within different articles. All in all, these 21 determinants are mostly valued as positively influencing start-up success. It is interesting to find out whether these determinants of the entrepreneurial team are also positively influencing internet start-up success. These 21 determinants will be used throughout this research to identify the perceived importance of each of the determinants for internet start-up success. Now, the determinants of the internet start-up lifecycle will be demonstrated and explained.
2.6 The four stages of the internet start-up lifecycle
Every start-up starts at one point and goes through different phases, which can also be defined as the internet start-up life cycle. Each phase in the internet start-up life cycle is different and comes with different understandings. Regarding the literature of several articles (Kazanjian 1988; Blank 2007; Berman et al. 2011) there is a mix between the stages of the internet start-up lifecycle. They all conclude that the first stage is for everyone the same, it’s about building a first version of the product or service and try to validate the need of the customers the firm would like to target. If the need has been validated, it is important to see if the constructed business model aligns with the demand of the market and therefore it will be tested in the second stage, the validation stage. The third stage is about growth and efficiency. If the need is there and sales can be accomplished, then it’s all about efficiency to be capable to serve the market. When this is accomplished, the start-up becomes formal and maturated, and is then
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able to scale and grow and defend its position within the market. Drori et al. (2009), states that a start-up life cycle of an internet start-up goes very fast. Theory shows that lifecycle models exists of predetermined sequence of stages, and viewed as a linear progression, while each stage of the lifecycle exists of different determinants that can influence the success of the internet start-up (Berman, 2011). The article of Berman (2011), shows four stages which will be used throughout this research because they are the most suitable for internet start-ups. These stages are discovery, validation, efficiency and scale.
Discovery stage
The discovery stage is about consumer orientation. Start-ups are focused here on whether they are solving a meaningful problem and whether anybody would be hypothetically interested in their solution.
Validation stage
The validation stage is about validation of the business model. Start-ups are looking to get early validation this means that consumers are willing to exchange money or attention in return for their developed product/service.
Efficiency stage
The factor efficiency is about optimization of the product. Start-ups refine their business model overhere and they are improving on the efficiency part of the customer acquisition process.
Scale stage
The scale stage is about being ready to expand the business within market or entering new markets. Start-ups are attacking the market in order to drive growth fast (Berman, 2011).
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As earlier discussed, start-ups evolve through four stages within its internet start-up lifecycle. Berman (2011), identified events that are specific within each stage of the internet start-up lifecycle. The type of events, how many and how often completed by the entrepreneurial team influences the ability to be a successful internet start-up (Berman, 2011). Table 1 presents the events identified by Berman (2011) and can be used as an internet start-up guideline. The actual start-up lifecycle of the internet start-up can be compared with this guideline to determine whether an internet start-up is completing the determinants of the internet start-up lifecycle which are according to Berman (2011):
completing the right events in the right phase within the right time
Table 1: internet start-up lifecycle stages including events according to Berman, (2011).
2.8 Conceptual framework
As described above, previous studies have investigated which determinants influence start-up success. It is interesting to find out whether these determinants of the entrepreneurial team are
Discovery •founding team formed • customer interviews •value proposition found •minimal viable products are created • Team joins
incubator or accelerator • Family and friends
financing • first mentors &
advisors on board >5-7 months
Validation •refinement of core features
•initial user growth •metrics and analytics are implemented •seed funding •first key hires •adjustments
•first paying customers
•product market fit >3-5 months Efficiency • value proposition redefined • user experience overhauled • conversion funnet optimized • viral growth achieved • repeatable sales found • scalable customer acquistion channels found >5-6 months Scale • large a-round • massive customer acquisition
• back and scalability improvements • first executive hires • process
implementation • establishment of
departments >7-9
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also positively influencing internet start-up success. A conceptual framework will be constructed from the findings from the literature review with a focus on the determinants of the entrepreneurial team and the different stages of the internet start-up lifecycle. Several determinants of start-up success are identified within the literature regarding the
entrepreneurial team. In total, 21 characteristics are demonstrated and described. These determinants can be divided into three sub constructs to create a clear and understandable framework. The division of the 21 determinants is based on their characteristics. Some determinants are focussed on internal characteristics of the entrepreneurial team. Some determinants are focussed on the external characteristics of the entrepreneurial team. Finally, some characteristics are focussed on prior experiences of the entrepreneurial team. This leads to the division of the three sub constructs:
Internal characteristics of the entrepreneurial team External characteristics of the entrepreneurial team Prior experiences of the entrepreneurial team
Relationship variables
Each sub construct consists of a set of determinants. The article of Berman (2011), shows that the stage based model correlates with behaviour and success. Within this research this means that the four stages of the internet start-up lifecycle, discovery, validation, efficiency and scale correlate with the determinants of the entrepreneurial team and start-up success. The
determinants of the entrepreneurial team and the four different stages of the internet start-up lifecycle are independent variables and are positively related to internet start-up success, the dependent variable. The four stages of the internet start-up process moderate the relationship between the determinants of the entrepreneurial team and internet start-up success. Summed up, each determinant can be influenced by each stage in the internet start-up life cycle thus the
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stages of discovery, validation, efficiency and scale. Within these four stages of the internet start-up lifecycle its interesting to investigate which determinants are perceived as highly important for internet start-up success. Besides, its interesting to find out whether these defined sub constructs will vary in importance among the stages of the internet start-up. In order to that, entrepreneurs can focus on the key determinants perceived as most important to go successfully from stage to stage and grow a sustainable business. The relationship between the variables can be made visible with a conceptual framework shown in figure 1.
Measuring internet start-up success
This research measures internet start-up success as the valuation of perceived importance of the determinants of the entrepreneurial team. This means that this research measures the perceived importance of the determinants for each subsequent stage to demonstrate internet start-up success. This way of measuring success is common in the research field and can be seen as a valid measuring (Delone & McLean, 1986; Jones & McLoad, 1986).
Hypotheses
The conceptual framework first needs to be investigated and validated through gathering qualitative data. It is important to investigate how all the constructs within the conceptual framework are related towards each other. Therefore, qualitative data is needed to generate ideas and insights. After gathering qualitative data and interpreting the results of the
qualitative data several hypotheses can be derived and tested through quantitative data. This is the reason why the hypotheses will be formulated in the first results part of this research.
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Figure 1: Conceptual framework
2.9 Contributions of this chapter to the rese arch question and its sub questions
The literature study investigated articles that were relevant for this research and provided answers towards several sub research questions.
1. Which definitions of entrepreneurship are given in the existing literature? And which of them is suitable of internet start-ups?
Internal charactistics
Race
Gender
Creativity
Ability to learn from the best practice
Capability to act on feeback
Education level
Personal investment
Need for achievement and motivation
Vision
Mind-set
Decision making
Ability to work hard
Ability to reduce risks
External characteristics
Helpful mentors
Entrepreneurial parents
Size start-up team
Prior experiences Industry experience Entrepreneurial experience Marketing experience Managerial experience
Discovery Validation Efficiency Scale
Internet start-up success
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Several definitions of entrepreneurship are given in the first part of the literature review. Joseph Schumpeter (1911), was mainly important for the present discipline of
entrepreneurship. On the basis of Schumpeter’s work, many different entrepreneurship definitions have been generated. The most of these definitions consists of the following elements: 1) identification of entrepreneurial opportunities, 2) innovation and novelty, 3) securing of resources and formation of an enterprise/ an organisation, and 4) profit-orientation taking into account reasonable risks and uncertainties (Volkman et al, 2010).
A suitable definition of entrepreneurship for internet start-ups should involve a clear specific definition summarizing al important subjects involved within the internet start-up. The definition opted by Schumper, (1934), is a bit old fashioned. The definitions opted by Roger et al., (2007) and Timmons & Spinelli, (2008) are a bit to broad not covering all important subjects for internet start-up entrepreneurship. The one most suitable for internet start-ups is from Hirisch & Peters, (2002). This definition is more dynamic than the other ones,
summarizes the subjects involved specific for entrepreneurship and internet start-ups by covering inputs and outputs, time and effort and feelings of satisfaction and independence.
“Entrepreneurship is the process of creating something of value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence” (Hisrisch &
Peters, 2002).
2. Which definitions of success are given in the existing literature? And which of them is suitable for internet start-ups?
Regarding the literature, internet start-up success can be defined in many different ways. Success can be seen as a multidimensional construct which is determined by financial and operational performance. Indicators of financial performance over here reflect a company’s
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economic performance while indicators of operational performance can affect financial performance (Hill, 2013; Combs et al., 2005; Venkatraman & Ramanujam, 1986). As mentioned before, survival rate alone is not a suitable definition for internet start-up success because some internet start-ups may survive but not successful. So the definition opted by Van Praag (2003), ‘Business success is the ability to survive without the necessity of a
compulsory exit’ (Van Praag, 2003) is not a suitable definition for internet start-ups. The
definition opted by Kessler et al (2012), which involves actual starting a business as an indicator for business success, is also not a suitable definition for internet start-up success. Internet start-ups might have started and have first sales revenues and yet still not be
successful. “Founding success is defined as the actual start of business activities (first sales
revenues), while new venture survival is defined as the existence of the venture over a certain period of time after the actual start of the business” (Kessler et al. 2012).
A suitable definition for internet start-up success involves a combination of some of the mentioned definitions from the literature review together. The combination of the definitions summarizes the subjects involved within success for internet start-ups by covering inputs and outputs, the internet start-up process and feelings of satisfaction.
“The ability to go through a dynamic process of business model iteration and validation whereby the entrepreneurs or other key actors are satisfied about the levels of outputs in comparison to the inputs derived within this process” (Friend & Tauer, 2015; Hill, 2013;
Spiegel et al., 2015).
3. What are the determinants of internet start-up success based on the entrepreneurial team?
Within this research 21 determinants are identified throughout the existing literature. Some determinants are investigated in more researches than others but overall, these determinants are all characteristics of the entrepreneurial team. These 21 determinants are divided based on
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their characteristics into three sub constructs: internal characteristics, external characteristics and prior experiences. Figure 1 demonstrates all these determinants of start-up success based on the entrepreneurial team. Some determinants showed overlap in outcome and some showed contradictions within the investigated articles. The determinants that showed contradiction are education level, entrepreneurial experience and managerial experience. A summary of the determinants of success within the investigated literature can be found in appendix A.
Education level
The results from Lee & Lee, (2006); Lussier & Halabi, (2010); Sorensen & Chang, (2006); Bosma, (2004); Cooper et al., (2004), and Nielsen, (2015), show that entrepreneurs with higher level of education are more likely to be successful than entrepreneurs with lower level of education. The results of Hessel, (2010) show that entrepreneurs with medium level of education are more likely to become successful than entrepreneurs with higher level of education. The limitation of the article of Hessel, (2010), show that their study had a small sample size including nascent entrepreneurs from only two countries. They were also not able to identify the sub stages of the start-up process so they could not investigate whether medium levels of education would differ in perceived success, which could imply the different
outcome.
Entrepreneurial experience
The results from Song et al., (2008); Duchesneau & Gartner, (1990); Suart & Abetti, 1990; Sorensen & Chang, (2006), show that entrepreneurial experience positively influences start-up success. The results from Van Gelderen et al., (2001) differ. They show that
entrepreneurial experience is not influencing internet start-up success. The limitations of the article of van Gelderen et al., (2001), show that there is only a partial connection between
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success in their model on the one hand and reasons actually given by the people themselves, which could imply the different outcome.
Managerial experience
The results from Sorensen & Chang (2006); Duchesneau and Gartner (1990); Kataki, (2003), show that managerial experience is positively influencing start-up success. The results from Van Gelderen et al., (2001) differ. They show that managerial experience is not influencing internet start-up success. The limitations of the article of van Gelderen et al., (2001), show that there is only a partial connection between success in their model on the one hand and reasons actually given by the people themselves, which could imply the different outcome. Overall, the 21 demonstrated and explained determinants are mostly valued as positively influencing start-up success. Some determinants are only identified by one article, some determinants show contradictions in outcome and some are only mentioned by a few articles. Because of that, it is of high relevance to further investigate this topic of interest. It is
interesting to find out whether the identified determinants of the entrepreneurial team are also positively influencing internet start-up success. These 21 determinants will be used
throughout this research to identify the perceived importance of each of the determinants for internet start-up success in general and among the different stages of the internet start-up lifecycle.
4. What are the determinants of the different stages of the internet start-up lifecycle?
Regarding the literature of several articles (Kazanjian 1988; Blank 2007; Berman et al. 2011) there is a mix between the stages of the internet start-up lifecycle. The internet start-up lifecycle model which will be used throughout this research is the model from Berman et al., (2011). There are four stages identified among the internet start-up lifecycle. These stages are
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discovery, validation, efficiency and scale. The determinants of the different stages of the start-up lifecycle identified by Berman (2011) are:
completing the right events in the right phase within the right time
Table 1 shows a summary of the determinants of the different stages of the internet start-up lifecycle.
3. Method
3.1 Research design mixed method
This research will be a mixed method using the strategy of a multiple case study (Saunders et al., 2008). A multiple case study strategy is chosen within this research because of the fact that case studies can help with understanding the dynamics of multiple settings (Eisenhardt, 1989). The multiple case study will be used to investigate the interaction effect between the determinants of the entrepreneurial team and the stages of the internet start-up lifecycle based on perceived importance. This research combines qualitative with quantitative evidence. The combination of these two data types will be synergistic (Eisenhardt, 1989). The qualitative data are useful for exploring the research field and finding underlying relationships in order to build theory which can then be strengthened by quantitative support (Eisenhardt 1989). Besides, through the use of multiple methods the robustness of results can be increased and findings can be strengthened through the cross-validation. This will be achieved when different kinds and different sources of data converge and are found to be congruent or when an explanation is developed to account for divergence. Thus, the case for combining methods of qualitative and quantitative is strong (Gable, 1994).
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This research uses qualitative data through semi-structured interviews. This way of data gathering is inductive and thereby used to build theory. This method will explore the research field in order to generate ideas, find patterns, effects and insights about how the variables of the conceptual framework are related with each other. The semi-structured interviews will give in- depth information about the relationship between the determinants of the
entrepreneurial team and internet start-up success influenced by the stages of the internet start-up lifecycle. The semi-structured interviews are thereby used to validate the conceptual framework. The conduction of gathering qualitative data is crucial within this research to be able to come up with specific ideas for the hypotheses.
3.3 Quantitative data method
This research uses quantitative data through a survey. This way of data gathering is deductive and thereby used to test the theory. This method will test the hypotheses and the conceptual model by measuring the relationships between the variables of interest. The survey is based on a 3X4 within subject design. The independent variable, determinants of the entrepreneurial team, is measured within subjects. The sample group of will be exposed to all the same questions of the survey. Within the survey design, the dependent variable, perceived importance, will be measured among the three divided sub constructs of the independent variable, determinants of the entrepreneurial team and among the independent variable, the four stages of the internet start-up lifecycle. The 3X4 within subject survey design will be used to test the existence of a statistical interaction effect between the three sub construct determinants of the entrepreneurial team and internet start-up success which is moderated by the four stages of the internet start-up lifecycle (Harrison, 2013).
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This research focusses on the entrepreneurial team. The entrepreneurial team of Dutch
internet start-ups are the focus of the sampling strategy. To be more specific, within the Dutch internet start-up entrepreneurial team, the founder, CEO, CTO, CMO, developer and the manager are the sample of interest. Besides the entrepreneurial team of Dutch internet start-ups, the opinion of Dutch accelerators, Dutch entrepreneurship professionals and Dutch venture capitalists will be taken into account. Overall, this means that the founder of the start-up, the CEO, CMO, CTO, developer, manager, accelerator, professional and the venture capitalist are the sample interest within this research.
The sampling strategy of this research is snowball and network sampling (Nadler et al., 2015). Snowball sampling is a non-probability sampling technique that will be used to identify potential respondents in this research field because of the difficulty to get access with internet start-ups, accelerators, entrepreneurship professionals and venture capitalists. The reason for choosing the snowball sampling method is that the sample of this research is limited to a small subgroup of the population and therefor difficult to approach. By using the snowball sampling it is easier to approach more people because of the chain referral. After contact with the first respondent, the researcher will ask the respondent to help identify people from the same interest. Network sampling will be used in addition to the snowball sampling strategy. Network sampling is also a non-probability sampling technique and utilizes a ‘word of mouth’ approach of acquiring respondents. The reason for choosing the network sampling method is that the sample of this research is limited to a small subgroup of the population and therefor difficult to approach. By using network sampling the participants originally recruited suggest further participants. By using these sampling strategies it could be possible that some of the participants have not completed all stages of the internet start-up lifecycle yet, or are still trying to get to the final stage. This research strives for many respondents as possible but at least 10 interviews and 50 survey responses are needed to validate this research.
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The gathering of qualitative data is based on semi-structured interviews. The aim of the interviews is generating ideas, finding patterns, effects and insights about how the variables of the conceptual framework are related towards each other. The semi-structured interviews will give in- depth information about the relationship between the determinants of the
entrepreneurial team and internet start-up success influenced by the stages of the internet start-up lifecycle. Within this research two interview questionnaires will be made. One specific for the Dutch internet start-up entrepreneurial team and one specific for Dutch
accelerators, entrepreneurship professionals and venture capitalists. The initial structure of the interview is the same which means that the themes within the interviews are the same but some questions differ based on the function of the respondent within the internet start-up scene.
Before the interview will be started, the aim of the interview and the research will be explained to the respondent. When focusing on the interview questions the first questions are about personal information followed by questions about the business profile. After gathering the general information, the respondent will be asked how they would define success and failure for internet start-ups. Subsequently, the interview will bring more focus towards the specific subject of interest. More information about the determinants of internet start-up success will be given to the respondent by explaining the conceptual framework. After that, the respondent will be asked questions about the internet start-up process and the internet start-up lifecycle by first explaining the stages of the internet start-up lifecycle. Subsequently, the interview will focus on the determinants of the entrepreneurial team. First, general
questions about the determinants of the entrepreneurial team will be asked to the respondent. After that, the respondent will be asked to rank the determinants based on perceived
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success. This means that the ranking of the determinants of the entrepreneurial team for
internet start-up success is based on the perceived importance of the respondent. Subsequently, the respondent will be asked to rank the determinants among each stage of the internet start-up lifecycle based on the found most important three determinants. Within the final part of the interview, the respondent will be asked questions based specific on the individual
determinants. The interview questions can be found in appendix B.
3.6 Procedures interview
Respondents will be approached via email or telephone via snowball and network sampling. Within this first contact an introduction will be given regarding the research. A short
summary of the research will be given and the relevance of being part of the research will be explained in order to trigger the respondent. By explaining that the results will be summarized in a short research report which will be send to them after the research, the respondent will feel that there is also something in it for them. When the respondent is able to participate an appointment will be made to meet face to face. The respondent will be able to choose the location for the interview. Most of the time it will be at their offices or at a café. All the interviews will be held through face to face contact and will take approximately 40 minutes. All interviews will be recorded to be able to transcribe them later. To be fully prepared the interview questions, definitions of concepts and the conceptual framework will be printed. When meeting face to face the respondent will be given a handshake. Before starting the interview, the aim of the interview and the research will be explained to the respondent. After that, the respondent will be asked if it is possible to record the interview. Then the semi-structured interview starts. The predefined questions will be leading throughout the interview but sometimes within the story of the respondent deviations need to be made. After asking the general questions more information about the determinants of internet start-up success will be
