HOW VENTURE CAPITAL FIRM IN SEA EVALUATE INVESTMENT DECISIONS ON EARLY-STAGE START-UP

• Main Author: Haris, Faldi
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/85558
• Institution: Institut Teknologi Bandung

The realm of Venture Capital (VC) funding has undergone a remarkable evolution, particularly within the context of emerging economies, where entrepreneurial dynamism is on the ascent. Notably, Southeast Asia (SEA) has emerged as a beacon of promise, as evidenced by its remarkable performance in VC fundraising. Notwithstanding, the VC success rate is quite low, with up to 75 percent of venture- backed businesses failing to return cash to their investors and 30 to 40 percent of those 75 percent liquidating their assets, with their investors losing their entire investment (Ghosh, 2012). Against this backdrop, this study embarks on an exploration of VC firm behavior in SEA and the intricate decision-making processes. By defining the significant parameter, this research is expected to increase VC firm success rate and contribute to enrich VC literature. Leveraging the comprehensive framework developed by Gompers et al. (2023), this study aims to decipher the multifaceted landscape of VC operations in one of the world's most dynamic entrepreneurial ecosystems. Case study, a well-established approach in exploratory studies, serves as the guiding methodology to unveil new themes and insights gleaned from VC firm respondents. Using semi-structured interview this study imply that VC fund structure & strategy, start-up stages, start-up performance, management team, start-up valuation method, exit, and risk management have significant effect in determining SEA VC firm investment decisions. Cross case analysis is used to examine how parameters are prioritized and considered by VC firms within each group. These groups comprise GVC (Government Venture Capital), CVC (Corporate Venture Capital), and IVC (Independent Venture Capital). This research stands as one of the pioneering attempts to apply Gompers et al.'s (2023) framework within the context of Southeast Asia. It extends the existing body of literature on VC decision-making by introducing two novel measurement parameters: "burn rate" and "runway." These parameters, which pertain to a startup's expenditure rate and its sustainability over time, respectively, provide an enriched understanding of the financial dynamics governing SEA VC firm investments.