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Chapter 10: Business Angels and Energy Investing: Insights from a German Panel Study
Dietmar Grichnik and Christian Koropp* 1 INTRODUCTION A sufficient and appropriate supply of financial resources is essential for fostering entrepreneurial activities in terms of successfully starting and growing new ventures. The lack of financial resources is a major impediment for innovative activities, particularly in small high-tech ventures (Canepa and Stoneman, 2008). Typically, start-up financing is limited to the private capital of the founder, family and friends, business angel capital, venture capital (VC) and public funds (Berger and Udell, 1998; Howorth, 2001; Grichnik, 2009). Entrepreneurial activities in the energy sector are mostly based on at least incremental technology innovation processes and thus carry high risks, especially in early development stages. In general, the amount of financing required by such technology-oriented start-ups and early-stage firms exceeds the available financial resources of founders, family and friends. Accordingly, there is the need to finance foundation and subsequent growth with outside equity. Despite the wide range of existing governmental grant schemes in Germany (for example, High-Tech Gründerfonds), the predominant financial source for early-stage ventures with its inherent uncertainty and high-risk nature seems to be business angel capital since venture capitalists’ investment focus has shifted to more mature ventures carrying less risk (Osnabrugge, 2000; Branscomb and Auerswald, 2002; Sohl, 2006; Dimov and Murray, 2008). In Germany, 80 percent of all high-tech start-ups obtaining outside equity received their funding from business angels (Fryges et al., 2007). Although substantial research on business angels began during the 1980s (Wetzel, 1981; Tymes and Krasner, 1983; Gaston and Bell, 1988)...
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