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Financing of startups - investors’ requirement for exit strategy: A comparative study of Norway and the United States

Bjerkestrand, Kristine Engdahl; Helland, Tale Lefdal
Master thesis
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URI
http://hdl.handle.net/11250/2432572
Date
2016
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  • Master Thesis [3375]
Abstract
“A company doesn’t sell itself though it is a success. A lot of work has to be put into the exit

strategy”

Rune Rinnan, Founder and Venture Capitalist, Televenture

This thesis aims to gain an understanding of the conditions in Norway and the US regarding

financing of startups and the importance of exit strategies. In addition, the thesis will study how

culture within the business environments can affect both availability of startup funding and

investors’ focus on exit strategy. The main focus is therefore to identify if investors in fact focus

on exit and if there are differences between the two environments. Investors’ main goal is to

achieve return on investment, and the return relies on successful exits. Therefore, one should

expect every investor to focus on exit strategy. The research question is as following:

Which requirements do investors have regarding exit strategies when investing in innovative

startups, and are there any differences between investors’ requirements in the US and Norway?

To gain insight in this subject we found it beneficial to construct a qualitative research. We

conducted personal interviews with individuals who have established innovative startups and

investors supporting startups financially as angel investors, seed investors and venture

capitalists. In addition, we interviewed individuals who have expertise in this subject as they

are operating as consultants for startups. The respondents’ different experiences were beneficial

as it allowed for a nuanced analysis. The data was analyzed based on relevant theory from

researchers within the academic fields that we found to be applicable.

Writing this thesis and examining the research question has uncovered several interesting

findings. Both Norwegian and American investors pay little attention planning for a specific

exit strategy, especially in early stage when investing in a startup. However, in later stages the

focus on exits increase for both entrepreneurs and investors, as the exit becomes more

prominent. It is also evident that there are differences between the cultures in Norway and

Silicon Valley which have implications on the market dynamics for financing of startups. There

are clear differences in market size, investors’ competence and the use of standardized metrics,

which seems to have a significant impact on entrepreneurial success.

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