Authors
Levin L.
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Degree
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Postgraduate Student, the Department of Economic Analysis of Organizations and Markets, the Department of Applied Economics, the Faculty of Economics, NRU-HSE |
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E-mail
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lmlevin@hse.ru |
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Articles
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Venture investments as an entry barrier to the developing technology markets: the influence of venture funds strategies on the market monopolizationThe article deals with the problem of a limited access to the venture financing for the early stage
technology startups (so called «Death Valley» companies) which results in the industry monopolization
by several large players despite a significant economic potential of alternative technology
solutions and niche products. The author demonstrates that venture funds maximizing the return
on their investments typically prefer to invest only in potential market leaders. While following such
investment strategy the investors typically use a set of standard operational KPIs which might
inadequately forecast the future development of the business. Besides the investor’s expectation
with respect to the anticipated market structure and therefore the advantages of the leader’s position
vs. the followers might be inaccurate. However, given that early stage startups have almost
no access to alternative sources of funding, the strategies of venture investors might result in the
depletion of smaller players and eventually technology monopolization, which has been proved by
several examples on the Russian internet market. The problem might escalate sue to the significant
influence of investor’s sentiment (i. e. the expert opinion of other venture market’s players on the
project’s potential) on the venture fund’s decision-making process.
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