Role of Venture capital on the survival of Startups: a fuzzy set Qualitative Comparative Analysis

Abstract

Startup needs financing at different stages from ideation to maturity stage. In the initial years the requirement of finance is small they need infrastructural support and networking. Increase in size of the firm requires large amount of firms, marketing, networking, expertise in their respective field. These funds are supported by Angel investors, Venture Capital(VC), Bank loan (some cases) and Government funding. Among these VC are prominent source of financing especially at the later stage. But Raising finance from VC is a crucial task involving pitching ideas, generation of traction and communication of business model. Most of the firms are unable to generate funds from VC due to problems in scalability and sustainability. Owing to the expertise VC would be offering in the funding stage the demand for VC funds is very high. But all the firms raising funds do not succeed and there is no guarantee that those firms who are unable to take advantage of VC fail. The present study uses fsQCA analysis to determine the legitimacy of VC funding. The study tries to find out the combinations with which VC funding will lead to favorable outcomes of survival.  VC funding have strong impact on survival of firms but it proves to be insufficient alone in determining results. Size, sector, use of technology and social media also show positive influence on startup survival when combined with VC funding.