Master Thesis
Entrepreneurial exit
The inception of exit intentions by entrepreneurs in
high-growth tech ventures
Vrije Universiteit
Student: Sebastian Karas Student number: 2607970 Email: sebastian.karas13@gmail.com
Supervisor: Enno Masurel Master of Science in Entrepreneurship
Preface
The copyright rests with the author, Sebastian Karas. The author is solely responsible for the content of the thesis, including mistakes. The university cannot be held liable for the content of the author’s thesis.
Abstract
Entrepreneurial exit is a complex phenomenon and the academic research of this topic is nascent. Most recent studies about entrepreneurial exit focus on the evolution and analysis of exit strategies while addressing issues such as multi-level nature of definition, divergence among exit and failure, and miscellaneous types of entrepreneurial exit. Since academic researchers have not devoted enough attention to entrepreneurial exit intentions, this study aims to fill out the gap by answering the research question “To what extent do entrepreneurs anticipate entrepreneurial exit in the early stages of their firm’s development and what factors influence this decision?”, while reviewing and combining three academic theories that include types of entrepreneurs, firm’s life-cycle, and entrepreneurial exit. In order to answer the research question a questionnaire was sent to European tech entrepreneurs and a quantitative method was chosen for the analysis which checked the significance of six hypotheses that were formulated based on the aforementioned literature. The variables such as entrepreneur’s growth-orientation, entrepreneur’s serial-orientation, company backed by Business Angel or VC, level of entrepreneurial experience, entrepreneur’s level of industry experience, and entrepreneur’s level of education were investigated to check for the correlation with early exit anticipation. The results indicate that a majority of entrepreneurs from the sample do formulate the entrepreneurial exit intentions in the early-stage of the firm’s life-cycle. Moreover entrepreneurs who earned a Master’s or higher degree, formulate entrepreneurial exit intentions earlier than the lower educated entrepreneurs. The paper is extensively concluded and the discussion section provides the argumentation for the rejected hypotheses. Finally, the directions for the future research are presented to guide scholars who aim to further develop the theory regarding this phenomenon.
TABLE OF CONTENTS
Preface Abstract
I. Introduction 5
1.1 Importance of entrepreneurial exit phenomenon 5
1.1.1 Widely occurring circumstance 5
1.1.2 Effect on the economy 6
1.1.3 Relevant statistics - substantial financial implications 7
1.2 Gaps in the existing research 8
1.3 Current study 10
II. Literature Review 12
2.1 Types of Entrepreneurs 12
2.1.1 Definition of the entrepreneur 12
2.1.2 Push and Pull entrepreneurs 14
2.1.3 Necessity-based and Opportunity-based entrepreneurs 14
2.1.4 Nascent entrepreneurs 15
2.1.5 Lifestyle entrepreneurs 15
2.1.6 Serial entrepreneurs 16
2.1.7 Growth-oriented entrepreneurs 17
2.1.8 Conclusion 17
2.2 Firm’s life cycle 18
2.2.1 Defining firm’s life cycle 18
2.2.2 Growth models 19
2.2.3 Early stage of the firm’s life cycle 22
2.2.4 Conclusion 23
2.3 Overview entrepreneurial exit literature 24
2.3.1 Overview of the entrepreneurial exit literature 25
2.3.3 Various factors that influence entrepreneurial exit choice and intentions 27
2.3.4 Entrepreneurial exit - options 28
2.3.5 Conclusion 28 III. Hypothesis 30 IV. Methodology 32 4.1 Research design 32 4.2 Questionnaire 33 4.3 Data collection 34 4.4 Data analysis 35
V. Results & Analysis 37
5.1 Frequency tables 37
5.2 Statistical analysis 45
VI. Discussion 52
VII. Conclusion 57
VIII. Limitations and directions for the future research 58
References 59
I. Introduction
Academic research about entrepreneurship has been popular for a long period of time (Audretsch, 2012) and the topic has grown in importance over last fifteen years (Jones et al, 2014). Wiklund et al. (2011) stated that entrepreneurship has appeared as one of the most crucial, dynamic, and significant fields in social and management sciences. However, with the accelerated emergence of academic thinking and analysis about entrepreneurship, some aspects have been underestimated and did not receive enough attention from researchers. To be more specific, academic authors mostly focused on investigating new venture creation, thus entry and growth stages of a business are widely covered (DeTienne, 2010). Elements such as the entrepreneurial process and opportunity identification (Fisher, 2012), networks creation (Elfring and Hulsink, 2003), start-up actions (Korunka et al., 2003), team development (Borchert et al, 2006) or creation of innovation and strategy (Quinn, 1979), have been developed to a profound level of academic knowledge. When it comes to the gaps in literature on the topic of entrepreneurship, until now little consideration has been devoted to exit processes. Exits are the least inferred section of academic writing about startups and investing, even though, they are a critical part of the entrepreneurial process (DeTienne et al, 2015). The nascent stage of the literature was one of the author's motivations to select this niche subject in relevance to research about the entrepreneurship phenomenon.
1.1 Importance of entrepreneurial exit phenomenon
To show the importance of the chosen topic, several quotes from the entrepreneurial exit precursors and the global Mergers and Acquisitions statistics will be brought up in the following section. The question is, why is it so essential to research entrepreneurial exit?
1.1.1 Widely occurring circumstance
“Whether a privately held business is large or small, in a traditional field or exclusively in Internet commerce, newly started or generations old, it is owned by one or more individuals —
and those owners all have one trait in common: They will someday leave that business. They may sell the business, they may close it down, or they may die in the saddle. But one way or another, exit they will!” (DeTienne, 2010). As stated above, all entrepreneurs at some point in their entrepreneurial career will leave the company they helped to create. It is also worth mentioning that exit of the entrepreneur completes the entire cycle of the entrepreneurial process because every entrepreneurial entry might potentially end with an exit (Aldrich, 2015). Previous research acknowledged that around 50% of all entrepreneurs admit to arranging an exit scenario (DeTienne and Wennberg, 2014). Serial entrepreneurs will accomplish this process multiple times during their work (Ucbasaran et al., 2001) and scholars knowledge is scant for such a widely occurring event.
1.1.2 Effect on the economy
Exit is an essential part of the entrepreneurial research, not only because all entrepreneurs will encounter it but also due to the significant degree of influence that it can have on the surrounding environment (DeTienne, 2010). Mason and Harrison (2006) presented two possible scenarios to confirm this statement. Firstly, they say that entrepreneurial exit positively stimulates regional economic development, which is supported by the fact that entrepreneurs after harvesting wealth, time, and accumulated experiences from the exited venture, will probably relocate those resources into one or even multiple new entrepreneurial initiatives with the evident economic prosperities. This ‘entrepreneurial recycling’ may consist of new venture creation, reinvestment of human capital into other ventures, enhancing local infrastructure or donation of association activities. By investigating case studies of five Scottish firms, authors concluded that post-exit founders established considerably more companies, operated as early-stage investors focused on seed investments, created a venture capital fund, supplied to the technical base of knowledge, and brought in foreign capital. Secondly, they say that the harvested wealth through exit can be redistributed among employees who have received stock options. It is a frequent occurrence that founders give some part of their equity to early stakeholders to motivate them, and to show them trust and responsibility. Following this direction, those already experienced beneficiaries with newly collected capital can move on to establish their own companies and contribute to the
economy by creating more jobs, sharing their knowledge or support charities (DeTienne and Cardon, 2012).
1.1.3 Relevant statistics - substantial financial implications
According to Thomson Reuter (2017), global M&A (Mergers and Acquisitions) activity reached approximately $3.6 trillion in the last year with 49,448 tracked deals. That makes a growth of 3% in the number of transactions compared to the year 2016, and the new record since data is publicly accessible. If we look at the European scale, M&A activity targets the amount of $867.5 billion in 2017 with an increase of 17% in comparison to the prior year. As the numbers suggest, the M&A market has increased undoubtedly over the past few years but one industry has marked an unprecedented rise. The share of deals including a tech target has been expanding outstandingly fast. Currently, around 20% of all transactions have a definite link to some sort of technology (Kengelbach et al., 2017). According to Loritz and Wauters (2017) in the European tech ecosystem, there were 610 exits worth €61 billion last year. This includes 555 Acquisitions, 36 IPOs, 16 Mergers, and 3 Buyouts. The highest valued European IPO by a tech company in 2017 (€4.5 billion) appeared to be a german scaleup called Delivery Hero.
In addition, it seems that entrepreneurial exit will occur more often in the near future due to the aging population. For instance, in New Zealand, more than 50% of SMEs belong to founders that are over 50 years old (DeTienne et al., 2014). DeTienne and Cardon (2012) presented similar statistics from the United States, where they say that approximately 33% of American firms are owned by someone older than 50 years old. Besides, " it is estimated that 18% of the financial assets held by US households are invested in privately held firms, many of which were founded in the 1950s and 1960s by entrepreneurs who are, or soon will be, contemplating exit. " (Petty, 1997, cited by DeTienne et al., 2014).
Through analysis conducted by numerous consultants, investors, and tech professionals we can acknowledge that the M&A market is booming, therefore there is a need for scholars to understand entrepreneurial exit as the data is accessible and practitioners seem to be more aware
of this phenomenon. The academic perception on the field will provide new insights and better understand this aspect of entrepreneurship process.
1.2 Gaps in the existing research
Although, researchers have lately begun to accumulate a structure of knowledge concerning exit and started to agree that this phenomenon was under-researched and in need of more consideration, there are still several untouched topics (DeTienne and Wennberg, 2016). Recent studies which mostly focused on the evolution and analysis of exit strategies, addressed the following issues: multi-level nature of definition, divergence among exit and failure, miscellaneous types of entrepreneurial exit. In addition, the majority of academic papers investigate one particular exit route being family succession, along with its impact on the venture, stock valuation, and performance (Butler et al., 2001). The gaps exist not only due to the late start of studying this entrepreneurial phenomenon, but also because of aspects such as dissimilarities in the level of analysis, type of dependent variables, and theoretical perspective, which made it problematic to deduce evidence and findings from papers about entrepreneurial exit theory (DeTienne, 2010).
In this section, the author details a number of research gaps within exit domains that are relevant to this study. In the following subsection, the structure of this paper will be presented together with the statement regarding the research question.
The phrase ‘entrepreneurial process' is used to characterize a mixture of phases including start-up, where the process begins, to harvesting the input, the place where it ends. The majority of models aimed their attention at the early stages (DeTienne, 2010). For instance, Reynolds and White (1997) proposed that conception, gestation, infancy, and adolescence are the four stages of an entrepreneurial process. By the phrase ‘adolescence' he meant new venture creation. However, as mentioned before by showing the importance of entrepreneurial exit, this stage should be included in entrepreneurial models, otherwise, the process is incomplete. This is the
first gap in the literature (see for exceptions: DeTienne) that the author will take into consideration.
Surprisingly, the vast majority of previous research about entrepreneurial exit have applied the term to investigate the failure of a new venture (Strotmann, 2007). Notwithstanding, studies present that entrepreneurs consider exit and failure as two various phenomena (Knott and Posen, 2005). Eikhof and Haunschild (2006) explained one of the reasons why scholars have chosen to associate failure with an exit. Its roots come from the entrepreneurial lifestyle where ambition is not to boost profits but to survive. However, the aspect to differentiate various types of entrepreneurs will be discussed in this section later on. Also, Wennberg et al. (2010) suggested that scholars were mistaken due to the fact that they examined exit from the perspective of the firm. The venture's main goal is its performance, and if an entrepreneur wants to leave the firm, it has to be correlated with poor accomplishments. This paper will focus on the positive side of entrepreneurial exit to fill in the existing gap.
Our perspective of factors which drive founders to exit their companies is very nascent (DeTienne et al., 2015). Academic researchers have analyzed exit from the firm or industry level, therefore there is a gap in the literature in understanding how, why, and when entrepreneurs decide to leave the company. Shane et al. (2003) indicated that entrepreneurial process is set up by one or more individuals, as a result, it is important to investigate entrepreneurial exit from the entrepreneur level to provide the greater understanding of this phenomenon.
Entrepreneurs in privately held ventures possess a greater percentage of ownership than CEOs in publicly traded companies (DeTienne, 2010). That gives them a higher level of control over important decisions. Even though there are meaningful similarities between CEO succession in public companies and entrepreneurial exit, some characteristics make it problematic to infer findings from one phenomenon and presume that in the second one, results will be comparable (Wasserman, 2003). Thus, scholars should focus on one type of ventures while researching entrepreneurial exits.
Furthermore, the form of exit strategies that are accessible and eagerness to exit might differ undoubtedly between growth and lifestyle entrepreneurs. Hence, it is crucial to distinguish between them in academic studies. For lifestyle entrepreneurs exit might not be an unambiguous goal and the connection with performance is generally uncertain. On the other hand, for growth entrepreneurs exit is seen as the main objective. This distinction has crucial implications (DeTienne and Wennberg, 2014) and this paper will aim to examine only growth-oriented founders.
DeTienne and Cardon (2012) underlined the importance to study entrepreneurial exit intentions and defined the process like it is the founder's objective at some point in the company lifecycle to leave. They also found that around 70% of entrepreneurs exited in the way they have planned to. Although those results might be affected by the overconfidence of entrepreneurs which is one of their characteristics, it signifies sound correlation between exit and intentions. Prior studies mostly focused on intentions of new venture creation, whereas the focal point of this thesis is to examine entrepreneurial exit intentions. In addition, the author will investigate those intentions on founders of young startups, as they are developed early in the life-cycle of the firm (DeTienne, 2010). It is partially supported by the view that exit intentions influence important future orientations of the venture, including acquisition of resources, growth, type of funding, and risk-taking propensities (Fauchart and Gruber, 2011). However, there is a need to verify this aspect, as well as if they change over time (DeTienne and Wenneberg, 2014).
To the author's knowledge, there is not much information in existing literature about entrepreneurial exit intentions of various types of entrepreneurs at early-stage of the firm’s life cycle, therefore this paper will fill in the gap by examining this subject.
1.3 Current study
After identification of gaps in the existing research that are presented in the section above, and in order to move on in the development of literature about entrepreneurial exit, the objective of this
thesis is to investigate exit intentions of entrepreneurs that helped to create tech startups in various European industries.
The author aims to answer the following research question:
To what extent do entrepreneurs anticipate entrepreneurial exit in the early-stages of their firm’s development and what factors influence this decision?
In order to get a better understanding of the topic in the theoretical part of this thesis, the following sub-questions have been designed:
1. What is the early stage of firm life-cycle? 2. What types of entrepreneurs do we have? 3. How do we define entrepreneurial exit?
To answer those questions, this paper proceeds in accordance with the following structure. Firstly, literature about the types of entrepreneurs, the firm’s life cycle, and entrepreneurial exit are reviewed in the literature review chapter. Secondly, the hypothesis section and description of the methodology is provided in the following chapters. Thirdly, the data and findings are presented in the next sections. And finally, the discussion and conclusions connect all the elements above and offer implications for further research about entrepreneurial exit.
II. Literature Review
In this chapter author presents theory framework that has been conducted and analyzed to fully understand the topic of this thesis. The concepts that will be described include: types of entrepreneurs, firm’s life cycle, and entrepreneurial exit. Each of them is reviewed and summarized based on the existing literature.
2.1 Types of entrepreneurs
As it was already mentioned, entrepreneurship is a complex phenomenon that can have a variety of forms. Researchers have agreed that it is crucial to recognize distinct types of entrepreneurs while examining aspects such as their characteristics, motives for selecting entrepreneurship and their effect on the economy. Throughout the past years of entrepreneurship research, scholars have been examining various categories of entrepreneurs according to diverse dimensions (Gundry and Welsch, 2001). Examples of these classifications include personality type, stage of life cycle, age, high or low technology, age, gender, size, region, and many others. The author of this thesis suggests that this distinction should be implemented within the entrepreneurial exit domain, thus in this subsection the literature of various types of entrepreneurs will be reviewed.
2.1.1 Definition of the entrepreneur
First of all, it is crucial to present how researchers define an entrepreneur. According to scholars, an entrepreneur is easy to recognize although problematic to define. Schumpeter characterized the entrepreneur as an individual that is trying to find and promote novel combinations of productive functions (Long, 1983). Stevenson and Jarillo (1990) based their definition on Schumpeter’s work that includes innovation aspect, and described entrepreneur as an entity that is associated with the process where a combination of resources and opportunities are exploited to create value. To simplify this definition, the value is developed when an individual tests novel combinations. Hence, the critical factor that differentiates entrepreneurs from managers is exploitation. Another definition, provided by Alfred Marshall states that the entrepreneur is
someone who is running and managing an organization (Hornaday, 1992). Marshall also distinguished non-entrepreneurs and entrepreneurs by presenting various characteristics. Moreover, he added that those characteristics are the most important determinants when we define this phenomenon.
In the history of entrepreneurship research, many scholars have worked on entrepreneur’s definition, however, some of them are widely recognized as pioneers. Long (1983) in his paper reviewed their definitions and listed them in the chronological order. The author of this thesis elaborated Long’s work to finish this paragraph by presenting below a table with the most important definitions.
Author Definition
Richard Cantillon (1730) ● Entrepreneur defined as a self-employed individual
● Additional uncertainty accompanies self-employment
Jean-Baptiste Say (1810) ● Successful entrepreneur should possess managerial talents ● Many uncertainties and obstacles
follow entrepreneurship
Joseph Schumpeter (1910) ● Entrepreneur finds and promotes new combinations of productive factors
Frank Knight (1920) ● Courage to bear uncertainty is the
essential aspect of the entrepreneur
Edith Penrose (1960) ● Entrepreneur identifies and executes opportunities for expansion of small ventures
Harvey Leibenstein (1970) ● Entrepreneurial activity is about reduction of organizational inefficiency and organizational entropy
opportunities is the central function of the entrepreneur
Table 1: Definitions of the entrepreneur
In the following paragraphs, various types of entrepreneurs that have been described in the existing literature will be presented and defined.
2.1.2 Push and Pull entrepreneurs
One of the most popular methods that scholars use to classify entrepreneurs is the distinction between push and pull entrepreneurs (Amit and Muller, 1995). In this case, researchers have aimed attention at the influence and existence of push/pull situational determinants of individuals’ motivation to start entrepreneurial activities and the recognized aspects contained the entrepreneur’s frustration with current way of life, childhood experiences and role models, family situation, professional career, age, education, and structure of support networks (Mueller and Thomas, 2000). In abounding situations, entrepreneurs may be simply pushed into entrepreneurship, in some cases against their wishes as a result of loss of employment, current job dissatisfaction or other career obstacles. Regrettably, these entrepreneurs are commonly perceived in a negative way by society (Brockhaus, 1980). Contrarily, entrepreneurs can be pulled into entrepreneurship by various factors that are viewed positively by most societies. For instance, those factors include preparation such as training or exposure to venture that shows interest and confidence in searching for new opportunities to exploit (Krueger, 1993). Some scholars have considered one of two, a push or a pull as essential to new venture creation as it causes a state of natural readiness to step in, once a convenient opportunity and essential resources can be recognized.
2.1.3 Necessity-based and Opportunity-based entrepreneurs
Another distinction that is adopted by scholars is opportunity-based and necessity-based entrepreneurs. Those terms were promoted by GEM (Global Entrepreneurship Monitor) (Reynolds et al., 2002). Authors of this report asked entrepreneurs to indicate why they have
decided to start the entrepreneurial activity and grow their ventures. Opportunity-based entrepreneurs stated that the reason was to take advantage of a business opportunity or seek better opportunities. On the other hand, necessity-based entrepreneurs stated that the argumentation was no better choice for work. The fundamental characteristic for opportunity-based entrepreneurs is their affirmation of a voluntary career decision to seek an entrepreneurial path. Contrary, necessity-based entrepreneurs have chosen entrepreneurial activity as other alternatives were not visible or were treated to be inadequate. Similarly to push entrepreneurs, necessity-based ones are also called reluctant entrepreneurs as their choice is defined by a term survival.
2.1.4 Nascent entrepreneurs
The term ‘nascent entrepreneurs’ represents individuals considering self-employment as a professional career choice (Reynolds et al., 2002). They differentiate from novice entrepreneurs that are interpreted by scholars as entities with no prior entrepreneurial experience as a founder or purchaser. Researchers examining nascent entrepreneurs mostly describe their intentions to start an entrepreneurial activity. Cartera et al. (2003) listed six types of reasons of those entrepreneurs to start a business: (1) innovation - intention to start and achieve something new; (2) independence - desire for flexibility, freedom, and control; (3) recognition - acceptance from friends, family, and society; (4) roles - desire to adopt family culture and traditions; (5) financial success - intention to earn financial security; (6) self-realization - aim to achieve self-directed goals.
2.1.5 Lifestyle entrepreneurs
Another type of entrepreneurs that is commonly identified by academics are individuals that own and operate a business closely related to their personal values, passions, beliefs, and interests (Marcketti et al., 2006). We call them lifestyle entrepreneurs as the ventures that they helped to create are correlated with life quality: to support outlets for sharing original work or to support flexibility in controlling demands associated with family, work, and community roles. The reason why lifestyle entrepreneurs decide to start a business is not a career choice but rather a
plan to obtain self-fulfillment. Marcketti et al. (2006) defined it even more simply: “lifestyle entrepreneurs uniquely developed activities of day-to-day living into fully functioning businesses.” They are fueled by the ambition to achieve a respectable living, discover satisfaction in career realization, and have quality time with friends and family. Even though the general benefits of entrepreneurial activity, such as profit, innovation, job creation, are well acknowledged, the literature differentiates lifestyle entrepreneurs by their additions to the community, family, and life quality against high growth. As a result of their focus, lifestyle entrepreneurs bring various important community services. Nevertheless, associating them as business owners completely concentrated on personality and charm offer, disregards the ambitions of most lifestyle entrepreneurs.
2.1.6 Serial entrepreneurs
Parker (2014) defined serial entrepreneurs as individuals that run multiple ventures in sequence. He mentioned that portfolio entrepreneurs distinguish from serial entrepreneurs as they run numerous businesses in parallel. On the other hand, novice entrepreneurs have so far managed only single business. Some researchers tried to estimate the number of serial entrepreneurs as they contribute to the economy is worth attention. For instance, Westhead et al. (2005) state that 43.5 % of the Scottish ventures are run by serial and portfolio entrepreneurs. Jing (2009) stated that serial entrepreneurs’ motivation to be involved in entrepreneurial activity is very diverse but so far most of the studies were based on limited and small samples, thus our understanding of this phenomenon is scant. He explained that serial entrepreneurs start new businesses because they want to examine new opportunities, rebuild their failures or simply use the entrepreneurial knowledge and experience that they already possess in other industry. Additionally, Jing (2009) reported some of the characteristics of these types of entrepreneurs such as: “Serial entrepreneurs are more likely to have successfully sold their prior ventures before starting a new business” and “The current firm has a higher chance of going public if the entrepreneur’s previous venture was acquired”.
2.1.7 Growth-oriented entrepreneurs
Several papers and studies have been conducted to examine whether growth-oriented entrepreneurs share similar characteristics upon which scholars can build their profile. Now it is broadly acknowledged that they can be distinguished and identified by their objectives to job creation, internationalization and innovation, each of them is positively associated with the economic development which is crucial for most of the governments (Amoros and Bosma, 2014). Growth-oriented entrepreneurs know that they want to grow their venture from its existence and do so by hiring more employees, boost their capital expenditures, discover new markets or establish new franchises in other locations. The authors of OECD report (2010) have built a profile of growth-oriented entrepreneur indicating that the entity is well educated and possesses professional and industry experience. Moreover, the individual comes from an existing labor force and after few years being an employee becomes inspired to start own business. Furthermore, before launch of the venture, high-growth entrepreneur usually has a bright business vision on how to commercialize the idea. Authors of Harvard Business Review report that is titled “The High-Intensity Entrepreneur” identified a similar profile of grow-oriented entrepreneur, suggesting that the individual holds a degree from a university and has five or more years of experience from a global company (Habiby and Coyle, 2010).
2.1.8 Conclusion
By reviewing the existing literature concerning various types of entrepreneurs, author identified: push and pull entrepreneurs; necessity-based and opportunity-based entrepreneurs; nascent entrepreneurs; lifestyle entrepreneurs; serial entrepreneurs; and growth-oriented entrepreneurs. Those types are predominant in the current research and scholar mostly focus on them, therefore, this particular distinction is listed and described in this section. However, regarding the main topic of this thesis that is the anticipation of entrepreneurial exit at the early-stage of the firm’s life cycle, there are more variables and characteristics that can be used to distinguished entrepreneurs while examining creation of entrepreneurial intentions. In the chapter ‘Hypothesis’ more consideration will be devoted to this aspect.
2.2 Firm’s life cycle
This paper examines entrepreneurial exit intentions of early-stage ventures, thus the firm’s life cycle concept is reviewed below, followed by the explanation of useful growth models that are relevant for this study. Furthermore, the early-stage of the firm’s life cycle will be identified and explained.
2.2.1 Defining firm’s life cycle
The firm’s life cycle theory has been widely characterized and described by scholars over the last decades (Yan & Zhao, 2010). As reported by Bodie et al. (2005) a venture typically goes through several life cycle phases with distinguishable profiles per each growth stage. During the first years of its development, just after the funding, there is lack of advantageous investment opportunities that can be leveraged. After this period, when a company starts to grow and becomes more structured as an organization, natural developments within the firm can be implemented as the production process is more sufficient and balanced to meet market expectations. Moreover, new competitors are willing to enter the market, thus readiness to compete with them is essential. From this moment, most ventures gradually reach the next level of becoming more mature. At this stage, the market evolves into saturation and sales growth starts to decrease. Additionally, some firms begin to decline in the number of employees as less personnel is needed when a venture is not growing as it used to before. This quintessential path reflects how most companies grow and a Figure 1 below summarizes this approach.
Figure 1. Firm life cycle
As with every theory, some researchers criticise this one as well. Yan and Zhao (2010) stated that they have at least two dilemmas in consideration and implementation of the firm’s life cycle models. Firstly, there are countless theories concerning firm’s life cycle and none of them is considered as primary. However, this aspect is discussed in the next section. Secondly, it is problematic to select the methodology to assign ventures to a particular phase within a model.
2.2.2 Growth models
Growth models represent a number of sequential phases through which a venture grows (Adams et al., 2007). Scholars mostly highlight the aspect of knowledge resources in controlling organizational growth. To be more precise, those models mainly examine the aggregation of organizational capabilities and resources in relation to the size and age of the venture. Moreover, the various crisis and problems a firm might encounter at a specific phase of growth are highlighted within literature, followed by necessary solutions on how to move on to the next phase of its development. Thus, researchers suggest that growth of a firm contains a predictable series of events and firm’s evolution relies upon the approach that human capabilities can develop applicable processes and systems to exploit opportunities. Furthermore, growth models determine particular resource correlations that entrepreneurs will encounter at every phase of the firm’s life cycle.
Levie and Lichtenstein (2010) reviewed growth theories in the academic literature that were published from the year 1962 to 2006 and recognized 104 various stage models. Their summary states that most of the growth theories include between three and six stages. What is more, each firm stumbles upon traceable points where traction is essential to reach the next phase. Thus, at each level of the firm’s life cycle ventures deal with and solve comparable problems. For instance, Churchill and Lewis (1983) stated that difficulties of people, planning, and systems continuously raise in importance as the venture develops.
Figure 2. Churchill and Lewis (1983) growth model
To the highest knowledge of the author, the growth model by Churchill and Lewis is widely acknowledged and elaborated by other scholars, therefore, more detailed summary of their work is presented in the Figure 2 above. Additionally, Table 2 sums up their assumptions.
Growth stage Key challenges and activities
Existence Founder manages everything and depends on close network for help.
Survival Simple organization with key challenges of managing cash flow and becomes more professional with established delegated management functions and appropriate systems.
Success Venture is managing cash flow and grows into more professional organization with established delegated management actions and appropriate systems.
Take off Growth requires access to additional finance and the ability to manage and delegate progressively complex organization.
Maturity Owner has gathered the human, financial, business, and system resources that are crucial to trade efficiently. Requires strategic
capabilities to be ready for future threats and opportunities.
Table 2. Summary of Churchill and Lewis model
The second growth model that is underlined by Levie and Lichtenstein (2010) as influential was invented by Greiner (1972). According to him, organizational systems which guide the growth of the venture will finally limit expansion. To extend the growth period, entrepreneurs should apply new organizational systems. His linear model implies that organizational structures will change while the firm grows, and novel coordination mechanisms are necessary to solve crisis stages. A more detailed explanation of these crises stages is presented in Table 3 below.
Growth stage Crisis
Creativity Leadership
Direction Autonomy
Delegation Control
Coordination Bureaucracy
Collaboration Internal growth
Alliances No crisis for this stage
Table 3. Greiner’s growth model
Greiner’s explanation of successfully growing firm suggests that dominant management approach and institutionalization of specific processes are critical. At the time when this approach starts to fail, and it will at some point, new organizational strategy should replace the previous one. The entrepreneur has to change the existing system to achieve the next growth phase by solving the ‘crisis’. This situation will appear at every phase therefore a similar approach and new strategies will help to supplement the constant growth of the venture.
According to DeTienne (2010), most of the growth models in the existing literature are focused on the nascent and early phases. DeTienne interpretation of entrepreneurial process goes further than that as the model ends with an entrepreneurial exit which is the main topic of this paper.
2.2.3 Early-stage of the firm life cycle
Even though, the literature is scant when we concern the identification and detailed description of the early-stage of firm’s life cycle, the author came to the conclusion after the discussions with his supervisor and few experts who are engaged with the startup ecosystem, that we can anticipate the early stage as the first two phases of the Churchill and Lewis model. This model has been chosen by the author as the most relevant for this study, thus the explanation will be provided on its example. Firstly, if we look at the Churchill and Lewis Figure 2 that is presented in the previous section, the horizontal axis shows us time, and the vertical axis illustrates the size
of the venture. To anticipate the early-stage of the firm’s life cycle, we should assume that time and venture’s size play a critical role. Thus, the first two phases of this model, that are existence and survival, are the earliest ones during the venture development process. To put it more simply, existence and survival are on the left side of the figure what suggests that considering them as the early-stage of the venture is a self-explanatory argument. Moreover, taking into account descriptions of those two phases that were presented by Churchill and Lewis, which states that in the first phase the founder manages everything, and in the second one, the firm is a simple organization with key challenges of managing the cash flow, confirmed the author of this paper that this argumentation is supported by the academic literature.
2.2.4 Conclusion
As it was already mentioned, none of the growth models has gained theoretical primacy due to the various reasons. Nevertheless, for the purpose of this study Churchill and Lewis (1983) model is implemented to identify the early-stage of the firm’s life cycle, that are existence and survival. This aspect will be further discussed in the chapter ‘Hypothesis”.
2.3 Entrepreneurial exit
The existing research is demonstrating two divergent views on entrepreneurial exit. Firstly, from the more practical perspective exit is considered as an ultimate goal of developing a profitable and efficient venture (Wenneberg and DeTienne, 2014). On the other hand, scholars repeatedly view this phenomenon as a dichotomous consequence that is a negative outcome for the entrepreneur and a failure for the venture (Teeffelen and Uhlaner, 2013). The author of this paper focuses on the positive and more practical side. The level of analysis in the extant exit literature is mainly conducted on the firm-level rather than individual-level, however, the aim of this paper is to understand when and why the founders of tech ventures make decisions concerning their entrepreneurial exit, thus the individual- level perspective is applied and defined. Considering those two aspects, the following definition of an entrepreneurial exit will be applied:
“The process by which the founders of privately held firms leave the firm they helped to create; thereby removing themselves, in varying degree; from the primary ownership and decision-making structure of the firm - is an important part of an entrepreneurial process.” (DeTienne, 2010).
To elaborate more about the last part of this definition, that is regarding the entrepreneurial process aspect, it is crucial to underline what DeTienne (2010) stated in his paper. According to him, a significant amount of researchers suggested that the entrepreneurial process ends with creation of the new venture. However, scholars should include entrepreneurial exit as the last phase of the entrepreneurial process as the central part of the new venture creation includes the ability to harvest the created value at some point in the future.
The next section will review the existing entrepreneurial exit literature. Then, the emphasis will be devoted to the entrepreneurial exit intentions. The following section will present the factors that influence exit choice and exit intentions. Lastly, exit options will be discussed.
2.3.1 Overview of the entrepreneurial exit literature
Wenneber and DeTienne (2014) stated that there has been a limited amount of qualitative research published to build the theory on exit. Recently scholars started to investigate this phenomenon and the generated data suggests that there are particular factors affecting an entrepreneur’s exit strategy, reasons for exit, and the differing exit options (DeTienne, 2010). Particularly, individual factors seem to be linked and correlated with the exit choice or exit intentions. According to Teeffelen and Uhlaner (2013), there is a relation between entrepreneurs’ characteristics such as entrepreneurial experience, intentions, motivation, goals, industry experience with the exit option and exit intention. Table 4 below presents some of the most important quantitative works concerning the topic of entrepreneurial exit.
Authors and main topic of the paper
Dependent Variable Independent Variable
Findings
Winter et al. (2004) Examining family owners over time
Exit outcome Firm resources Human capital
Firm resources and human capital are correlated with liquidation and succession Amaral and Baptista
(2007)
Drivers of various exit options
Exit outcome Owner characteristics Firm resources Human capital
Human capital and firm resources determine
independent sale and liquidation
Balcaen and Ooghe (2007)
Analyzing forced and voluntary liquidation
Exit outcome Firm resources Human capital Strong financial situation is a main driver of voluntary liquidation Teeffelen (2008) Comparing ownership transfer and liquidation
Exit outcome Owner characteristics Firm resources Human capital Exit choice
Firm resources and human capital varies unquestionably between ownership transfers and liquidations Ryan and Power Exit choice Firm resources Market
(2009)
Favored exit choice
Exit choice Specific market characteristics
characteristics, firm resources, and exit intentions affect exit choice
Leroy et al. (2010) Exit outcome Owner characteristics Firm resources Human capital Intentions Theory of planned behaviour Firm performance improves the theory of planned behaviour predictions Wennberg et al. (2010) Drivers of various exit options
Exit outcome Firm resources Human
Human capital and firm resources varies between different exit options
DeTienne and Cardon (2012)
Exit intentions and human capital
Exit choice Firm resources Human capital
Founder’s age, experience, and education are related to various exit options
Firm’s growth and size are related to exit choice
Teeffelen and Uhlaner (2013) Predictors of exit choice
Exit choice Firm resources Human capital
Firm resources and founder’s
characteristics predict exit choice
Table 4. Entrepreneurial exit literature - summary
As seen in Table 4, the existing papers mostly consider two dependent variables. One is the exit outcome, and the second one is the exit choice. Teeffelen and Uhlaner (2013) defined exit choice as the behavioral aim or decision of the founder to leave the venture. On the other hand, exit outcome is the conditional consequence of that decision. The majority of researchers decides to choose the exit outcome option, just a few examined and focused on intentions or preferred exit choice of the founders. Alberti (2013) mentioned that it is challenging to bring together findings from the previous works on entrepreneurial exit due to the various reasons such as differences in
analysis, theoretical perspectives, contexts, choices of independent and dependent variables, and the choice between firm-level and individual-level perspective.
2.3.2 Entrepreneurial exit intentions
According to Boyd and Vozikis (1994), intentions can be visualized as a function of beliefs that support a link between beliefs and consecutive behavior. This process can be simply illustrated as: belief causes attitude, attitude causes intentions, and intentions cause performance of a behavior. DeTienne and Cardon (2012) defined entrepreneurial exit intentions as the ‘entrepreneur’s desire or goal, at some point in the future, to leave’ the venture. To the highest knowledge of the author, there are not many papers that examine exit intentions. Furthermore, as mentioned by Wenneber and DeTienne (2014) ‘research is needed to verify that these intentions are created early in the life cycle of the venture’. One argument for investigating exit intentions in the early-stage of the venture is that they could influence future behaviors and decisions of the entrepreneur (DeTienne, 2010). Also, the exit strategy impacts many directions of the growing venture, thus not considering exit strategy early in the life-cycle of the firm might limit the entrepreneur’s options in the future. We can assume that entrepreneurial exit intentions are developed early in the life-cycle of the firms, however, the research is needed to confirm this assumption and investigate what factors influence this decision (DeTienne et al. , 2015).
2.3.3 Various factors that influence entrepreneurial exit choice and intentions Ryan and Power (2009) listed factors that influence and are crucial for the creation of entrepreneurial exit expectations. They include size of the venture, age of the venture, location of the venture, type of the venture, motives of the founder, level of family engagement, and whether the founder already thought about the exit. DeTienne and Cardon (2012) investigate exit intentions and conclude that founder’s age, entrepreneurial experience, industry knowledge and experience, and level of education affected entrepreneurial exit intentions. Moreover, Teeffelen and Uhlaner (2013) found that venture resources and entrepreneur’s experience anticipate exit choice.
2.3.4 Entrepreneurial exit - options
According to DeTienne et al. (2015), there are seven various entrepreneurial exit options that fall into three higher-level exit categories: financial harvest, stewardship, and voluntary succession. Financial harvest exits include IPO (Initial Public Offering) and acquisition by another company and result in substantial value accumulated by the entrepreneur. Stewardship exits consist of family succession, employee buyout, independent sale, and result in pro-organizational and pro-social behaviors that admit the founders to have an impact on the future and long-term viability of the venture. Finally, voluntary succession exits include liquidation and discontinuance which admit the entrepreneurs to disband a firm when the main activity ends or evolves or when the venture fulfills the aim for which it was developed. The definitions of each exit options are presented in Table 5 as seen below.
IPO Initial public offering indicates that a
meaningful part of a venture’s equity is sold in the public market
Acquisition Venture is obtained by another firm
Family succession Inheritance of an existing venture
Employee buyout (EBO) Employee buyouts as a form of harvesting
Independent sale Venture is obtained by an individual
Liquidation As consequence of venture failure that leads
to liquidation, company's assets are traded Management buyout (MBO) Management buyout in which existing
managers are buyers Table 5. Exit options
2.3.5 Conclusion
Entrepreneurial exit is the process by which the entrepreneur leaves the venture he helped to create and develop. Exit intentions are characterized as the founder’s goal or desire to leave the firm, and scholars suggest that those intentions probably are developed at the early-stage of the
firm’s life cycle. Moreover, the factors that influence exit intentions include the entrepreneur’s age, experience, industry knowledge, and level of education. This aspect will be further discussed in the next chapter.
III. Hypotheses
This chapter provides an overview of the six hypotheses that are derived from the literature review and which were formulated in order to answer the research question. As it was already mentioned, this paper combines three research concepts including the types of entrepreneurs, the firm's life-cycle, and most importantly the entrepreneurial exit. The reasoning behind this approach is that entrepreneurial exit is understudied by scholars and the author’s aim is to discover the potential relations between variables from the aforementioned concepts, to fill in the gap in the existing research by linking them to get a better understanding of the exit phenomenon. Some parts of the hypotheses are derived from the practical perspective rather than literature due to the inconsistency in the theory.
All the six hypotheses are formulated in a specific manner and include a term ‘early in the life-cycle of the firm’. This is correlated with the statement presented by Wenneber and DeTienne (2014) ‘research is needed to verify that these intentions are created early in the life cycle of the venture’. For the purpose of this paper the Churchill and Lewis growth model is applied which suggests that the firm’s life-cycle consists of five phases. As defined in the section 2.2.3 , where existence and survival are considered as early-stage.
Growth-oriented entrepreneurs (detailed description can be seen in the section 2.1.6) are defined as the individuals with a goal to grow their venture from its existence and do so by hiring more employees, boost their capital expenditures, discover new markets or establish franchises in new locations. Furthermore, DeTienne and Wennberg (2014) stated that for those types of entrepreneurs, exit is considered as the main objective. Hence;
H1: Growth-oriented entrepreneurs define an entrepreneurial exit early in the life-cycle of the firm.
According to Parker (2014), entrepreneurs that run multiple ventures in sequence are called serial entrepreneurs (detailed description can be seen in the section 2.1.5). Thus, we can assume that when they move from one firm to another, the entrepreneurial exit phenomenon occurs.
H2: Serial entrepreneurs define an entrepreneurial exit early in the life-cycle of the firm.
Venture capital firms (VCs) are organizations which invest in high-growth ventures that need capital to finance their growth or product development in exchange of equity. An exit at some point in the future of the venture, for instance through IPO, is critical for the VCs to harvest the initial investment (Black and Gilson, 1998). Therefore;
H3: Entrepreneurs of companies that are backed by VCs and angel investors define exit strategy early in the life-cycle of the firm.
DeTienne and Cardon (2012) have investigated exit intentions and found that founder’s characteristics such as entrepreneurial experience, industry knowledge, and level of education affected the creation of these intentions. Hence;
H4: Experienced entrepreneurs define an entrepreneurial exit early in the life-cycle of the firm.
H5: Entrepreneurs that possess industry experience define an entrepreneurial exit early in the life-cycle of the firm.
H6: Higher educated entrepreneurs define an entrepreneurial exit early in the life-cycle of the firm.
IV. Methodology
In this section, the research methodology will be discussed in details, including the aspects of research design, data collection, and data analysis.
4.1 Research design
As stated previously, the research question of this paper combines three various topics from the academic literature, that is types of entrepreneurs (section 2.1), the life cycle of the firm (section 2.2), and entrepreneurial exit (section 2.3). The six hypotheses, that were listed and described in the previous chapter, were formulated based on the theoretical framework from the literature review chapter. In order to examine these hypotheses, a quantitative research strategy has been chosen, where with a deductive approach the data was collected and further analysed. The dataset was created based on the questionnaire that was sent to the entrepreneurs from the sample. As suggested by Sanders et al. (2009), the size of the sample had to be big enough to secure the appropriate readability and validity of the findings. This aspect was considered by the author and is described in section 4.3.
The questions were grouped and formulated in such a way, so that they could include and examine the variables from the hypotheses. The questionnaire used in this thesis can be found in the Appendix E. The data has been uploaded into a statistical software SPSS where the hypotheses have been verified by the Chi-Square test of independence that suggests whether there is a correlation between two categorical variables. The structure of this research paper is presented in Graph 1 below.
Literature review of three topics:
Types of Entrepreneurs, Firm Life Cycle, Entrepreneurial Exit
Formulation of Hypothesis
Data Collection
Data Analisis
Discussion Graph 1. Research Structure
4.2 Questionnaire
The aim of this paper is to explore the creation process of entrepreneurial exit intentions in the early-stage of the firm’s life cycle and the factors that influence this decision. In the chapter literature review, the main concepts were identified, from which the variables crucial for this topic were derived. Each variable was considered by the author in the process of questionnaire creation. The questionnaire is divided into three main parts. The purpose of the first part that includes general questions, is to provide the reader with the basic information about the entrepreneur and his company. The aim of the second part that consists of the specific questions concerning the venture, is to examine the following variables: the stage of the firm’s development and if the company is backed by business angel or venture capital organization. The goal of the last part that includes questions concerning the entrepreneur, is to investigate the consecutive variables: level of entrepreneurial experience, level of industry knowledge, growth-orientation, serial-orientation, level of education, and exit anticipation. The answers to the questions from this part were mostly formulated with the usage of the five point Likert scale (strongly agree, agree, neither agree nor disagree, disagree, strongly disagree). An overview of the hypotheses and corresponding questions is presented in Table 6 below.
H1 Growth-oriented entrepreneurs define an
entrepreneurial exit early in the life-cycle of the firm. Tested variables: Growth-orientation, Exit anticipation Q9, Q13, and Q15
early in the life-cycle of the firm. Serial-orientation, Exit anticipation
Q14, and 15 H3 Entrepreneurs of companies that are backed by
VCs and angel investors define exit strategy early in the life-cycle of the firm.
Tested variables: Company backed by Business Angel, Exit anticipation Q7, Q9, and Q15 H4 Experienced entrepreneurs define an
entrepreneurial exit early in the life-cycle of the firm. Tested variables: Level of entrepreneurial experience, Exit anticipation Q9, Q11, and Q15
H5 Entrepreneurs that possess industry experience define an entrepreneurial exit early in the life-cycle of the firm. Tested variables: Level of industry experience, Exit anticipation Q9, Q12, and Q15 H6 Higher educated entrepreneurs define an
entrepreneurial exit early in the life-cycle of the firm. Tested variables: Level of education, Exit anticipation Q9, Q10, and Q15 Table 6. Connection between hypotheses and Questionnaire
4.3 Data collection
The collection of data was divided into four main periods as shown below.
01 The first period was to find sources for creating the sample of early-stage tech startups located in Europe. This has largely involved Google searches, screening digital databases of startups on platforms such as index.co or Crunchbase, as well as the use of word of mouth and a proximal personal network. Those ventures, which displayed the characteristics of early-stage startups with innovative tech solutions and interesting teams of founders, were chosen. The final list included 403 companies. Then, the social groups concerning startups on social media platforms such as Facebook or Linkedin, were selected. The latter was done to reach the biggest possible number of startups, with no selection bias (random sample).
02 After creating the list of startups, the author has used Linkedin to find the founders of those ventures. Moreover, by the usage of a plugin called Saleslift, it was possible to find the email addresses of those entrepreneurs.
03 Then, by connecting the spreadsheet that includes startups’ names, their founders and email addresses with the author’s email box and the usage of a software called Gmass, the first reachout was sent. The total number of emails amounted to 403. The content of the initial message together with a link to the questionnaire can be seen in Appendix A. Furthermore, private messages were sent to author’s connections on Linkedin. This communication is shown in Appendix A. At the same time, the author published a post on his personal Linkedin account with the request that is exposed in Appendix D. The last method was the message announced on the social media groups that is displayed in Appendix D.
04 After 5 days a follow up email was sent to all the startups that have not responded yet. However, the total number of emails sent was significantly reduced, as some email addresses were incorrect, some startups have already responded, and others replied that they do not consider themselves a young tech startup. The total number of follow up emails amounted to 337. This message can be seen in Appendix B. Due to the very ineffective results of posts on social media platforms this method of contact was dropped.
4.4 Data analysis
After receiving a satisfactory amount of replies from entrepreneurs that filled in the questionnaire, the dataset was reviewed for deformities. A few participants completed the survey several times, some have not answered one or two questions in a proper way, and three persons asked the author to change their statements concerning the anticipation of entrepreneurial exit. This screening process ensured analysis of the clean and structured data without lacking values or severe outliers. Then, the dataset was transferred into the statistical program SPSS.
Out of 83 responses that the author received from participants of the questionnaire, 64 were selected for the final analysis as early-stage startups are the subject of this paper. Thus, based on the literature review section 2.2.3, only ventures that are in the existence or survival phase are taken into account.
A series of analyses was performed in order to verify the formulated hypotheses that were presented in the previous chapter. Since all analyzed variables were of categorical type, each hypothesis was verified using Chi-Square test of independence that evaluates whether there is a relationship between two categorical variables. Moreover, before running main analyses, each variable was analyzed using Chi-Square goodness of fit test in order to assess whether the expected and the observed frequencies differ. The outcomes with detailed descriptions will be presented in the next chapter titled ‘Results & Analysis’.
Most of the variables used in the final analysis were computed by transforming the questions that were originally on an ordinal scale into a dichotomous scale. Each item that was measured on a 5-degree Likert (1 – “strongly disagree”; 5 “strongly agree”) scale was modified such that responses from 1 to 3 (where 3 represented “neither agree nor disagree”) fell into “low” category and from 4 to 5 fell into “high” category, where low and high represented the degree of respective variables manifested by a particular person. One exception was the question regarding to what extent the respondent considered him or herself as a growth-oriented entrepreneur. Here, additionally, a second type of transformation was made due to the skewed results. Based on the entrepreneurs who responded that they “strongly agree” fell into “high” category and all other into “low” category”. In the case of the education level variable, people were divided into two groups: “Bachelor or below” and “Master’s or higher”. Item concerning whether respondent’s company was backed by Business Angel or VC was left as originally constructed, since it was already on a dichotomous scale.
V. Results & Analysis
The author of this paper has collected 83 responses from the entrepreneurs that filled in the questionnaire, and in this chapter that consists of two sections, the outcomes of the dataset will be summarized. Firstly, frequency tables with a short description will be presented. Afterward, the results and findings of the Chi-Squared analysis will be discussed in order to check the significance of the hypotheses.
5.1 Frequency tables
All of the questions that were sent to the sample of entrepreneurs can be found in Appendix E. Picture 1 shows the results of the first question which suggests that 98,8% of the participants are the founders of the European tech startups.
Picture 1. Are you a founder of European Tech startup?
The conclusion of the third question is given in Picture 2. Moreover, 28,9% of the ventures were founded in 2016, 21,7% were established in 2015, and 13,3% in 2014. This aspect suggests that most of the firms are young in accordance to their age, which is a positive sign and confirmation
that the sample is correlated with the main research question and the topic of this paper which is the creation of exit intentions of the founders of early-stage companies.
Picture 2. When was your startup founded?
Furthermore, this confirmation is supported by the size of those firms as well. Picture 3 presents that 32,5% of the firms from the sample employ between 1 and 5 people, and 33,7% between 6 and 10.
The majority of companies from the sample operates in the Health Tech (16,7%), Financial Tech (10,1%), Retail Tech (9,4%), and Machine Learning and Artificial Intelligence (9,4%) sectors. The full summary of the question 5 is presented in Picture 4.
Picture 4. What is the industry in which your startup operates? (you can pick more than one)
In addition, most of the companies are headquartered either in the Netherlands (31,3%) or United Kingdom 21,7% as shown in Picture 5 below. This is the last Picture that represents general question from the questionnaire.
Picture 5. Where is your startup based?
The seventh question is summed up in Picture 6. 63,9% of the startups from the sample received external funding from a business angel or venture capital organization.
Question number eight was the only non obligatory part of the questionnaire, thus the outcome is limited to 66 answers and is demonstrated in Picture 7.
Picture 7. Are you considering raising funds from angel investor or VC? (optional question)
As shown in Picture 8 below, 75,9% of startups from the sample are in the early-stage of development as there are 13 firms in the existence phase, and 50 in the survival. Only those ventures will be considered in the statistical analysis section of this paper.
Surprisingly, all entrepreneurs that participated in this research, earned at least a high school diploma. This outcome suggests that nowadays founders of high-growth tech ventures are to same point educated. Within this paper, highly educated entrepreneurs (those who earned Master’s degree or higher) are represented by 68,6%.
Picture 9. What is your level of education?
61,5% of the founders declared that they agree or strongly agree with the statement that their entrepreneurial experience is high. This result confirms that entrepreneurs are really confident entities when it comes to the judgment of their professional career.
Picture 11. To what extent would you say that your industry knowledge is high?
Aforementioned statement is supported by the answers to the next question as well. Picture 11 presents that the majority of entrepreneurs claims that their industry knowledge is high. The results of this question are skewed to the right side as there are only four replies considered as disagree or strongly disagree.
Answers to the question numbered thirteen which investigates the growth-orientation variable are shown in Picture 12. The results are also skewed to the right side. There is only one answer described as disagree or strongly disagree.
Summary of the fourteenth question is demonstrated in Picture 13. Here the serial-orientation variable was examined and the results are diverse. The majority of entrepreneurs (33,7%) agreed with the statement concerning their serial-orientation.
Picture 12. To what extent would you call yourself a growth-oriented entrepreneur?
Picture 13. To what extent would you call yourself a serial entrepreneur?
The last question, which is crucial for this research paper as the variable measured is the exit anticipation, is outlined in Picture 14. 63,9 % of the entrepreneurs agreed that they thought about their potential exit strategy, and 20,5% strongly agreed. Only one participant strongly disagreed.
Picture 14. To what extent do you anticipate the exit from your company?
5.2 Statistical analysis
As it was already mentioned, only 63 responses are analyzed in this section in order to investigate the entrepreneurial exit intentions of the founders of early-stage ventures.
In order to assess whether the expected and the observed values differ a goodness of fit test was run. Since all variables were of a categorical type the analyses were conducted using Chi-Square test. All assumptions of the test – random sampling, independence of observations and expected values of at least 5 in each cell – were met. Results are presented in Table 7.
