The effect of Venture Capitalists financial reporting preferences in the adaptation of Management Accounting Systems in early-stage Venture Capital-backed start-ups
Lehtonen, Raoul (2022)
2022
Julkaisu on tekijänoikeussäännösten alainen. Teosta voi lukea ja tulostaa henkilökohtaista käyttöä varten. Käyttö kaupallisiin tarkoituksiin on kielletty.
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi-fe2022122673847
https://urn.fi/URN:NBN:fi-fe2022122673847
Tiivistelmä
Management accounting- and control systems (MAS and MCS) play a key role in strategic-decision making processes in companies of all sizes. These systems provide the management team with detailed, both financial- and non-financial, data on a company’s performance. However, their role in early-stage start-ups that strive towards international scalability currently lacks research. Furthermore, studies indicate that MAS and MCS serve as value-drivers and promote innovation in organisations. Since the VC-industry, that invests in privately held companies, lacks extensive documentation, studies in the field are required.
The purpose of the study is to research how VCs affect the financial management processes and infrastructure of their portfolio companies. In other words, if the joining of a VC-investor has an impact on the financial management infrastructure and reporting processes of an early-stage start-up, and what incentives drive the implementation of these systems. The study is conducted in the form of a semi-structure qualitative interview study, consisting of seven respondents in total. The respondents are CFOs or other financial managers of early-stage VC-backed start-ups and CFOs or GPs of European VC-funds.
The results indicate that, early-stage VC-backed start-ups track a myriad of different KPIs and other metrics. The tracking occurs in a far more detailed manner than what is required by their investors. The primary purpose of KPIs is to support start-up’s own business development purposes. VCs, however, avoid overstraining their portfolio companies with unnecessary extensive and complex reporting cycles. According to VCs, portfolio companies should use their limited resources primarily in business development and HR-related activities. Board seats and recruitment processes, especially of CFOs, are the primary channels of influence for VC-investors.
The purpose of the study is to research how VCs affect the financial management processes and infrastructure of their portfolio companies. In other words, if the joining of a VC-investor has an impact on the financial management infrastructure and reporting processes of an early-stage start-up, and what incentives drive the implementation of these systems. The study is conducted in the form of a semi-structure qualitative interview study, consisting of seven respondents in total. The respondents are CFOs or other financial managers of early-stage VC-backed start-ups and CFOs or GPs of European VC-funds.
The results indicate that, early-stage VC-backed start-ups track a myriad of different KPIs and other metrics. The tracking occurs in a far more detailed manner than what is required by their investors. The primary purpose of KPIs is to support start-up’s own business development purposes. VCs, however, avoid overstraining their portfolio companies with unnecessary extensive and complex reporting cycles. According to VCs, portfolio companies should use their limited resources primarily in business development and HR-related activities. Board seats and recruitment processes, especially of CFOs, are the primary channels of influence for VC-investors.