Are Swedish venture capitalists stuck in the past? : An explorative study on Swedish venture capitalists' position in the funding landscape of new technology-based firms

Sammanfattning: Currently, there are indications that Europe is facing an innovation deficit. The main explanation to the lack of innovation is considered to be that new technology-based firms are facing difficulties in receiving funding and consequently do not establish on the market. As new technology-based firms have an important role in technology development and overall growth, a consequence thereof could be a long- lasting negative effect on technological change and economic growth. The venture capital industry is frequently put forward as the actor that can provide financing for these types of firms. This study aimed to investigate the contemporary role that Swedish traditional venture capitalists and government supported venture capitalists have in the funding landscape of new technology-based firms. To fulfill this purpose, the study analyzed both the investors' preferences and the challenges with investing into new technology-based firms. The findings were acquired through performing eight semi- structured interviews with highly knowledgeable practitioners. In addition, literature was scrutinized. The study concluded that the preferences of the venture capital firms are heavily misaligned with investments into new technology and that digital companies present a better aligned investment alternative. More specifically, venture capitalists perceived the teams of new technology-based firms to be lacking, which is misaligned with the venture capitalists' strong emphasis on the team. New technology-based firms were also perceived to be associated with great risks, which is misaligned with the risk aversion of venture capitalists. The high risk was found to be related to the high degree of novelty, the perceived difficulties in finding syndication partners, the venture capitalists' lack of specific knowledge and experience, the long time to market and the large funding need in early stages. Further, the long time to market is ill-suited with the fund structure of traditional venture capital firms. On the other hand, digital companies were found to be well aligned with the venture capitalists' risk profile and preference for investing large amounts of capital at once. When it comes to government-supported venture capitalists, the study concluded that Industrifonden's preferences are similar to those of traditional venture capitalists and that Almi Invest, due to its structure, faces specific barriers for investing. Based on these findings, the conclusion was drawn that the likelihood is low that venture capitalists will invest in new technology-based firms. In order to be able to draw conclusions regarding the impacts on innovation and technological change, further research on the capabilities and preferences of informal venture capital is necessary. Further research could also attend to the demand of financing to increase the understanding of the innovation deficit.