Selection Criteria In Governmental and Private Venture Capital - A comparison

Abstract

Companies have, during recent years, increased the amount of venture capital (VC) that they invest in smaller start-ups. Today, private venture capitalists (PVC) and governmental venture capitalists (GVC) have sensed the value of such investments. The available literature comparing the decision criteria between GVCs and PVCs is scarce. Therefore, this study will explore how the two differ in their investing criteria pre-investment. Several interviews with Swedish venture capitalist firms were conducted where information about their criteria was gathered. From this, the findings were that GVCs and PVCs prioritise similar things when investing but to different degrees in some areas. The most important area that all firms consider to gain the desired results is the personality and determination of the start-up team. In other areas, such as sustainability and geography, there is a significant difference that can be prioritised between GVCs and PVCs, where GVCs invest in a much broader perspective since they have to benefit society by investing in underfunded areas. While PVCs may focus more on investing in established geographical regions with a proven track record of success and do not have the exact requirement to be as sustainable as the GVCs. However, some PVCs have also identified the potential with the positive correlation between sustainability and return on investment, making sustainable portfolio companies an attractive option.