Determinants of debt and equity financing for new HTFSs

How should high-tech start-ups finance their business? Should they borrow from a bank or is it better to relinquish some equity to a venture capitalist to avoid saddling the new company with debt? In this paper we focus on which factors influence the process of fund raising in a new tech venture (and how). Through Cambridge-based empirical evidences, we try to understand which variable control for optimal financing, from the firm’s point of view and what differentiate this perspective from investor’s one. Based on five companies (two VC backed, two because they had obtained equity from business angels and one as bank-backed), some improvements were also made to the model for the purposes of analysis (as concern the entrepreneur's disposition to open the business and technological related issues) and some new aspect have also been taken into account (such as the implementation of a soft start and the market description). On the basis of the data collection and analysis process, as well as interviewees’ comments, the indications are that the model of analysis proposed may be comprehensive and ready to be tested on a statistically significant sample.