Portfolio investors. These are individuals, banks and other financial institutions that buy and sell company securities at a late growth stage.

Crowdfunding. In European Commission report crowdfunding is defined as an open call to the public to raise funds for a specific project. Crowdfunding platforms are sites that provide a mutual interaction between fundraisers and investors (Financial Stability, Financial Services and Capital Markets Union of European Commission, 2016). The different business models used by crowdfunding platforms can be grouped into the following main categories:

Ш crowd investing: companies issue equity or debt instruments for crowd investors through the platform;

Ш crowdsourcing: companies or individuals seek to raise funds from the population through platforms in the form of a redirection agreement;

Ш account trading crowdfunding: a form of financing in which businesses sell outstanding accounts or receivables to investors through an online platform;

Ш reward-based crowdfunding: people donate funds to a project or business, expecting to receive non-financial rewards such as goods or services in return for their contributions;

Ш charitable crowdfunding: individuals donate sums to achieve the broader goal of funding a particular charitable project, without receiving financial or material returns;

Ш hybrid crowdfunding models

Financing of startups at different stages of the life cycle is carried out using equity, debt and hybrid forms of financing. Hybrid form of financing refers to the use of a source of financing that combines elements of equity and debt financial instruments, e.g. a loan with profit participation or a loan with characteristics of first debt and then equity financial instrument, e.g. a convertible loan (RVC JSC and Deloitte CIS, 2017).

Until the startup stage of early growth is reached, mainly equity financing is used, i.e. the company attracts cash only through sale of the share. Many entrepreneurs try to avoid this method, because at an early stage they have to sell the share at a low valuation of the company. The sale of a large share (more than 50%) in a company's ownership also leads to a loss of its competitiveness, as investors believe that it reduces the degree of interest of startup creators in the results of their work. The reason for applying equity financing is also the high risk of debt default by companies, which essentially equates equity financing with debt financing from an investor's point of view (RVC JSC and Deloitte CIS, 2017).

An analysis of the use of startup financing tools made it possible to identify a number of features that are typical for different stages of their life cycle.

1. Seed stage. At this stage, equity financing instruments are used, such as private equity investments and the purchase of a stake in a company, as well as hybrid instruments. As suggested by the Steigertahl et al. (2018) the most popular investment types, such as founders savings (Own funds) and friends&family might be used at this stage.

The basic types of early investments are self-funding or using funds from friends and family. In this case personal funding is a typical business foundation experience, when the founders of a business or a startup use their own funds to kickstart the development of a company. As for the so-called “friends, family and fools” or just family&friends - the name speaks for itself and that means a founder can collect investment equity from friends/family or other people, who are related to this founder from a non-business environment (Webber, 2016).

There is no debt form of financing at the seed stage. The main hybrid instruments are:

Convertible loan. The process of this type of a loan is as presented: one party (lender) grants the other party (borrower) a loan that can be converted into the shares of the borrower on agreed terms or must be repaid. The right to choose is usually left to the lender and can be triggered by a number of events (Rakhmanova, V. and Buzko, R., 2017). The use of a convertible loan in the early stages of project development is common practice around the world. The use of a convertible loan in the early stages of project development is also common practice around the world (RVC JSC and Deloitte CIS, 2017);

“Profit participating loan" guarantees the investor a partial return on the invested funds. In addition, the investor is paid interest for the use of the money, as well as accrued additional remuneration expressed in the share of profits. This instrument is used by the investor when the company's product is in line with the market trend and an excess profit is expected in the short term (RVC JSC and Deloitte CIS, 2017);

Warrant. A kind of an option, which is issued by the organization to obtain additional capital, and gives its owner the right to buy shares of the organization at a set price. Warrants are listed on the stock exchange, as well as other shares issued by the organization (Chen and Scott, 2020).

ICO (Initial Coin Offering). A relatively new and actively gaining popularity crowdfunding tool, based on the use of crypto currencies. ICO is a mechanism through which startups raise capital by selling tokens to a pool of investors. Often this token is a cryptocurrency, a digital way to exchange values based on distributed ledger technology (DLT) (Fisch, 2018; OECD, 2019)

2. At the early growth stage, equity financing, equity instruments (contribution to share capital and purchase of shares) and hybrid instruments are used such as:

Mezzanine loan - a relatively large loan, usually unsecured (provided without collateral) or with a deeply subordinated collateral structure (Ovanesova U.S., 2015). Such a loan is granted for a period of not less than three to five years with repayment of the loan body at the end of the term. The essence of a mezzanine is to allow companies - project initiators to make large investments without having significant capital (Petrikova, 2013);

Subordinated debt may be in the form of a loan or bond that meets several conditions: firstly, it has a maturity of at least five years; secondly, the loan or even part of it cannot be repaid ahead of schedule (if it is a bond, the issue can be repaid ahead of schedule) without the approval of the central bank (RVC JSC and Deloitte CIS, 2017)

STO (Security Token Offering) is a financing tool that has been gaining popularity over the past year, based on ICO, but which, unlike the latter, has collateral. A STO, or Security Token Offering, is an asset-backed financial bill of exchange that is considered a legally binding investment contract based on a siege. They are supported by various financial rights of investors, including dividends, shares and other financial instruments (Pwc, 2019).

As for debt finance instruments, the early growth stage can use the following:

Venture loan. It is a loan provided by venture capital funds for various periods of time at higher interest rates than those of banks. Venture capital is capital provided by professional market participants who invest and manage start-ups, emerging or transforming private companies that demonstrate high growth potential (CFI Education Inc., 2020a)

Bridge loan. This type of loan has a period of 6-12 months, allowing companies to quickly obtain cash for current needs before implementing the next phase of operations (CFI Education Inc., 2020b)

Despite the fact that at this stage there are debt financing instruments, the equity form remains dominant, as the risk of bankruptcy of the company is still high.

3. At the late growth stage, the following are used: equity instruments, hybrid instruments in the form of mezzanine financing, subordinated loan, ICO and STO, as well as debt instruments - mainly venture loans, bills of exchange and sometimes bank loans.

Concluding with this part of the paper, it can be said that there is a strong connection when it comes to startup funding and financing options and a startup's lifecycle. A startup is a specific kind of business establishment and it does have an innovative product with a business model, which both combined may attract huge investment. However, due to the same innovative nature of a startup, it has great chances of being shut down or, in other words, end up in the “Death Valley”. The last research by StartupBlink (2019), EY and G20 Young Entrepreneurs' Alliance (2013) and RVC JSC and Deloitte CIS (2017) has an excessive discussion about startup's success strategies and funding for different stages of life cycle. With mostly the help of the research by RVC JSC and Deloitte CIS (2017) it has been made possible to identify key specific financing and funding options for each stage of startup development.

Taking into account the reviewed startup's lifecycle in connection with funding and financing options, it is now possible to take this research further by projecting the obtained knowledge on the next chapter of the research. The following chapter focuses on pointing out the specifics of Russian and European (and in the selected case - Austrian) startup environments, provides with the details of a comparison methodology for both reports and finally, a discussion of findings from the comparison are presented at the end.



3. Comparing Russian and European (Austrian) funding/financing and support

3.1 Defining the comparison. Methodology

3.1.1 Presuppositions

The research on the exact same topic has not been found in the available public research community libraries. Unfortunately, there has not been a chance to get access to any specific entrepreneurial research on a similar topic due to this research possibly being private. Therefore, for the selected topic all of the presuppositions and hypotheses were defined with the help of a more generalized research about startup environments and startup challenges.

According to EY and G20 Young Entrepreneurs' Alliance (2013) the key challenge for startups was access to funding. The authors of the report identify access to funding as a barrier to business success. In the G20 report, Russia was holding 15th place (out of 20) for - “access to funding”. Nevertheless, the authors point out that 7 in 10 entrepreneurs have reported it may be the main problem for their businesses, therefore, this problem may be a common one for startups in general. As it has been already mentioned above, the industry of startups is a rapidly changing one, and, therefore, it may have changed throughout 6-7 years to the point when it is much less of a problem for entrepreneurs. According to the more recent research from 2016, in Europe startups have been facing different challenges (Kollmann et al., 2016). The major challenges were Sales/customer acquisition (19,5%), product development (17,1%), growth (16,6%) and raising capital (12,1%). This research has been conducted by interviewing over 2500 European startups, which operate in European countries and may have sales or production across borders.

As it was unexpectedly found out by the authors of this master thesis the European Startup Monitor 2016 is not the latest version for statistics on European startups. It appears, that different authors have taken on the challenge to update the report of 2016 by including data from biggest European startup institutions, which had some data to share. This included Austrian Startup Monitor 2018 by Leitner, K.H., Zahradnik, G., Dцmцtцr, R., Raunig, M., Pardy, M. and Mattheiss, E. (2018). The research EU Startup Monitor was done and compiled by Steigertahl et al. (2018). The report provides the reader with lots of data, as for startup challenges, the report states, that the biggest challenges for startups were: Profitability (86,2%), Cashflow/Liquidity (72,3%) and Customer Acquisition (55,9%). More details on startup key challenges are presented in the comparison part of this work.

The research article by GEMZIK-SALWACH and PERZ (2019) provides a literature review on the topic of the role of funding for startup development. The authors have found a research on Polish startups, which suggests that product development, team formation and funding access are the most important factors, which defy if a startup succeeds or fails. Moreover, the authors GEMZIK-SALWACH and PERZ (2019) have reviewed the report “Diagnosis of the ecosystem of startups in Poland” by Deloitte(2016). The report defines the startup ecosystem as a key to startup survival. The ecosystem itself consists of different points, such as: financing, legal, human and social capital, institutional environment. Each of these elements are claimed to be balanced in a sustainable and growing startup ecosystem. The report also provides statistics on Polish startup environment compared to developed countries ones. As the results suggest, on a scale from 1 to 4, Polish startups have the lowest scores for financing and social capital of 1,68 and 1,5 respectively.

It is still unclear how Russian startup environment compares to the statistics released for other countries, i.e. by EU Startup Report 2018 or Austrian Startup Report 2019. This research, in a form of master thesis, suggests there should be a push in developing the kind of research, that boosts the awareness of any startup ecosystem's status in comparison to others, which in turn might call for a better development of the environments as it is proven to be helpful for a country economy to support startup environments (EY and G20 Young Entrepreneurs' Alliance, 2013). The idea for making the comparison of Russian and European startup environments stems from the possibility to fill at least partly the gap that there is in this specific topic for research.

With no fully relatable previous research this research is then can be described as exploratory, in this case, the research explores the comparable characteristics of Russian and European (Austrian) startups and this way fills a research gap. The research gap is therefore the comparison of Russian and European startup funding, financing and receiving support opportunities.

3.1.2 Methodology and research sources selection

The methodology of a research is usually a set of methods or a particular research design, which is created in order to meet the needs of the research, e.g. meet the set goals and fulfill tasks. The usual methods for research are either qualitative or quantitative. For different goals and objectives, researchers might pick different research methods. When deciding on the research method, a researcher should take into consideration research questions of the research. For this thesis, the research question is “What are the differences and similarities in startup funding, financing and support in Russia and in Austria?”. To answer this research question, a qualitative comparison of two sets of data should be used.

Although, a plenty of research has been done in the recent years on startup lifecycle and financing of startup, apparently, no research has been found on a similar topic, which would compare Russia and Europe in terms of funding/financing and support. Both, Startup Genome (2019) and StartupBlink (2019) are big projects with lots of results, nevertheless, these sources have research on a global scale across the whole world. Alternatively, Kollmann et al. (2016) have published a European startup monitor 2016, followed by the EU Startup Momitor 2018 by Steigertahl et al. (2018). The research results from EU Startup Monitor will be used only partly for this research, because the given amount of comparable data with the Russian statistics available (in the form of Startup Barometer 2019) is limited to only two points: sources of funding/financing and key challenges. A more suitable comparison would be between Austrian startup monitor 2020 (results gathered in summer 2019) and Russian “Startup barometer 2019” (results gathered in early 2019). These reports seem to be more comparable and both have a lot of additional information worth discussing.

It is also important to mention that, unfortunately, this research deal with a secondary type of data. The secondary type of data is data received from selected sources and not collected by the researchers themselves. In this case the author had limited resources to provide this research with enough good samples from both Russian and Austrian (or any other European) startups. Over 500 startups were interviewed for the Russian report and for the Austrian report there were 710 respondents, which makes it in total over 1200 samples of interviews, which, in turn makes almost half of what European Startup Monitor 2016 by Kollmann et al. (2016) had (2515 startups interviewed across Europe). This makes both of the reports very viable for good results for interviews and the authors of the Russian report are saying they are very proud of their metric. However, the inability to have 1st hand data is clearly a limitation of this master's thesis research and it will be discussed in limitations and future research section.

The research will therefore follow with a comparison of the latest reports “Austrian Startup Monitor 2020” and “Startup Barometer 2019” by Leitner, K-H., Zahradnik, G., Dцmцtцr, R., Jung, S. and Raunig (2020) and Soloviev et al. (2019) respectively. The selection of exactly these reports and no other sources for the main part of the following comparison is based on multiple factors.

The first factor is that the “Startup Barometer” is the first and only research on startup environment in Russia. It is only run for the second year. The authors have launched the first survey in spring 2018 and this research, in authors' words has been a huge success. But at that moment the authors were not yet able to make predictions - there was a lack of retrospective and data dynamics. This year's research is described by the authors as a much better developed data collection with more accurate results. With the lack of a choice and a supporting word from the authors of the report, this report has been chosen as the first comparable source.

The second factor is that the research on the whole European startup environments, or in the case of funding, financing and support, is either outdated (European Startup Monitor 2016) or has little useful data for comparison (EU Startup Monitor 2018). The reason behind the first consideration is the presupposition, that the industry of startups is changing very quickly and the data, which is 3-4 years old may provide little to no convincing or reliable results. The second consideration, however, is up for a debate, therefore the data, which can be used for comparison will be used, but not as the main comparing element. For the main comparison, therefore, a specific source has been found in a form of the Austrian startup report 2020, which is has up-to-date information, and fits the requirements for a wide comparison in the topic of funding/financing and support.

Finally, the third factor is the comparability of information inside the Austrian and Russian reports. Both reports have been by chance structured in a similar way. Both of the reports have been conducting interviews with over 500 startups representatives. For Startup Barometer 2019 report the number of respondents is given as “over 500” and for Austrian Startup Monitor the authors had 710 founders of startups interviewed. The interviews in both of the reports were conducted in a similar manner, so that the results of the conducted interviews were also presented in a similar way. More information on which exactly points from the reports were found comparable by the author is presented in the latter subsection “Comparison” of this research below.

3.1.3 Hypotheses formulation

With the presuppositions in mind and the results of previously done research, it is then possible to form hypotheses before conducting the comparison.

As the previous research on startup environments suggests, the big problem, if not the most important, for startups is funding/profitability/access to support (EY and G20 Young Entrepreneurs' Alliance, 2013; GEMZIK-SALWACH and PERZ, 2019; Kollmann et al., 2016; Steigertahl et al., 2018) Therefore, for this research, it may be suggested, that it is similar for Austria and Russia, and if it is not true - proven otherwise in the course of research. Therefore, H1:

H1. The statistically most significant challenges for both Austrian and Russian startups are the ones related to funding/financing and/or support (compared to other challenges);

The second suggestion stems out of a generalized thought based on presupposition of economic situation of both countries. As opposed to Russia, which is a transitioning country from developing to developed, Austria, categorized as a developed country might have a better developed startup environment (taking into account, for example, that a better developed economic system and small business support programs point to a better startup environment) and, therefore may have better support and/or funding practices for startups (United Nations, 2019). Consequently, another hypothesis (H2) can be suggested (with a notice, that both startup environment reports have a comparable statistic gathered):

H2. Austrian startups are more satisfied with public sector (institutional) and government support than Russian startups.

While finding the first hypothesis is relatively a natural way of thinking, and the second one a logical presupposition, any other suggestions cannot be formed initially with ease, as there is no similar research or presupposition pointing to a problem or a question that is left uncovered. However, the EY and G20 Young Entrepreneurs' Alliance (2013) report suggests that funding opportunities are not in the top of challenges or problems startups in G20 (which includes both Russia and EU countries) have, while Kollmann et al. (2016) have results, that prove otherwise for European countries. Keeping in mind the hypothesis that checks if Austrian startups are more satisfied with government support than the Russian ones (H2), it can be suggested that the satisfaction levels do not remove the problems with financing and funding. Presumably, for Austrian startups governmental and institutional support may be more efficient on all challenges but the ones related to financing and funding, which in turn makes the problem (funding and financing) seem even more prominent than without the effective support. Therefore, the third hypothesis (H3) is suggested:

H3. In the Austrian report, the expression/difference of challenges related to funding, financing and support to the other challenges is higher, than it is in the Russian report.

As the research progressed, the other suggestion for the comparison was to check financing/funding sources for both countries. Luckily, both reports had the requested data in them. When discussing the means of funding/financing there can be different solutions, such as self-funds, family and friends, venture investments, business angels, bank loans etc. As reported in European Startup Monitor 2016 by Kollmann et al. (2016) and the latest EU Startup Monitor 2018 by Steigertahl et al. (2018), it is most common for startups to use their own funds as the basic means for funding. Nevertheless, as a country's startup environment matures, the other means of receiving funding/finance a startup become more and more available for the early stage as well as for the other stages. Still, as a rule of thumb for classic business, for startups it is also common to have self-funded cases as the majority. It is therefore suggested, that both Russia and Austria have the same pattern and most startups in both countries use their own funds to start the business. Therefore, H4:

H4. In both Austria and Russia using personal/own funds (self-funding) is the most common way of funding/financing for startups.

3.2 Comparison

In this section of research there will be elaborations and discussions for each point, which was found suitable for comparison. Additional data and statements from EU Startup Monitor 2018 by Steigertahl et al. (2018)are included where applicable.



3.2.1 Revenue statistics and sources of funding

Startup Barometer 2019

The Russian report has a section, which is focused on sales. As it is reported (Figure 7), for the last 12 months, despite the fact that many entrepreneurs consider their project innovative and unique, have a prototype and start selling, almost a third (33%) of startups still do not receive income. 22% of startups don't earn much - last year they have earned up to 1 million rubles. Some startups have earned 1-10 million rubles - 22% and only 16% of interviewed startups have earned over 10 million. Compared to the Startup Barometer 2018 survey, the revenue figures have not changed much over the year.

Figure 7. Startup revenue reported for the last 12 months in Russia.

Re-compiled and translated by the author from source: Soloviev, A. et al. (2019) Startup Barometer: Technology Enterprise Market Research in Russia. Available at: https://vc-barometer.ru/startup_barometer_2019 (Accessed: 2020).

Austrian Startup Monitor 2019

The Austrian report has a similar section for reporting revenue (Figure 8). The authors' suggestion for the high amount of no-revenue generating startups is that it is a long journey from idea generation to first sales. Gathered results from 428 respondents show that 73,6% of Austrian start-ups have generated revenue in the previous financial year (In Austria financial year is Jan-Dec), whereas the rest 26,4% had no revenue.

Figure 8. Startup revenues reported for the last 12 months in Austria. Number of respondents = 428.

Re-compiled and translated by the author from source: Leitner, K-H., Zahradnik, G., Dцmцtцr, R., Jung, S. and Raunig, M. (2020) AUSTRIAN STARTUP MONITOR 2019. Vienna. Available at: https://austrianstartupmonitor.at/ (Accessed: 17 March 2020).

26,2% had revenue of up to 50,000 EUR. Approximately one third (31,7%) of the start-ups reported revenue between 50,000 and 500,000 EUR in the previous year. 6,1% of the start-ups have generated between 500,000 and 1 million euros and one in ten start-ups exceeded the million-euro revenue mark in the previous year. As argued in Chapter 1 (Start-ups in Austria) of the Austrian Startup Report 2019, 62% of the start-ups surveyed are in the seed or start-up (analogous to the provided in the thesis early growth) phase. According to the authors, this percentage reflects the number of startups, which reported 0-150,000 EUR revenues for the last year - 65,2%.

Comparison findings for revenue statistics and sources of funding:

As a resulting statement from these revenue reports from both sources, it can be concluded that startups in both countries can relate to the general idea of startups requiring access to finance as a key to survival. The “death valley” point presented, for example, in figure 6 from the research by RVC JSC and Deloitte CIS (2017) is a point in the seed stage of a startup, when a startup has highest risks of failure. That is explained by the need to spend a lot of funds acquired at the start and no income in the early stages. The signaling need to look for early investment is in the statistics that mean most startups need to start earning profit on sales as soon as possible to start being at least somehow independent from investment and support of other entities. Let us define how startups can reach financial stability: it can be, for example, either a form of sales as cash flow income or active investment with access to government grants. Is financial stability in this case really the most challenging problem startups face at the seed stage and in general throughout their lifecycle? Then answer to that question might come with the help of results of the next comparison.

3.2.2 Key challenges

As the title suggests, the respondents in both reports have been asked which challenges have they faced while growing their business or if they are facing these challenges now. It is unfortunately unknown, what exactly the question was for either of the reports, however, in this case, let us interpret the results as if a general case question was asked - “What were the challenges your startup had faced?”

Startup Barometer 2019

As for this report, the authors have asked the entrepreneurs, based on their experience, to identify the main reasons that hinder business development. The main problem as it was in the Startup Barometer 2018 by the almost the same authors Soloviev et al. (2018) is the need for money, and in 2019 this problem is most acute - it was identified by 63% of respondents.

Figure 9. Main problems of Russian startups.

Re-compiled and translated by the author from source: Soloviev, A. et al. (2019) Startup Barometer: Technology Enterprise Market Research in Russia. Available at: https://vc-barometer.ru/startup_barometer_2019 (Accessed: 2020).

On the second place among barriers businessmen have put low interest of strategists in innovative products and the companies. From fifth to third place this year, the lack of qualified personnel has risen. The current state of the economy and Russia's position in the international arena this year has become less of a concern for entrepreneurs: 34% of entrepreneurs choose this answer, compared to 42% last year. 37% of the respondents have had problems with access to qualified personnel, which would be interesting to compare with Austrian report. Additionally, another interesting insight is that almost 1 in 5 of over 500 interviewed startups (19%) have been unsatisfied with government support or have reported there are none.

Austrian Startup Monitor 2019

In the Austrian report the respondents have been asked to report whether their startup have faced challenges. It is important to point out that in this year's report, the respondents' startups have been categorized in terms of foundation type. The types were defined as follows:

· Independent foundation;

· academic spin-offs from education institutions;

· academic spin-offs in the course of employment inside education institutions;

· corporate spin-offs (spin-offs of an existing company).

Figure 10. Greatest challenges for different foundation types of Austrian startups. Number of respondents = 591.

Re-compiled and translated by the author from source: Leitner, K-H., Zahradnik, G., Dцmцtцr, R., Jung, S. and Raunig, M. (2020) AUSTRIAN STARTUP MONITOR 2019. Vienna. Available at: https://austrianstartupmonitor.at/ (Accessed: 17 March 2020).

Regardless of the type of start-up defined above, “ability to keep cash flow/liquidity” as well as “sales generation and customer acquisition” are the greatest challenges for Austrian founders, with 18% on average each. Unsurprisingly, corporate spin-offs, which usually are already business experienced and have great financial starting capital, have far less liquidity concerns (13%) than independent start-ups (19%) or both types of academic spin-offs (~21%). For spin-offs that are created in the course of an academic education, customer acquisition (28%) is by far the greatest challenge reported. Only around 17% (on average) of start-ups of other types consider this point to be significant. Among spin-offs founded in the course of an academic employment relationship, product development (16%) and sales growth (14%) are seen as disproportionately compared to other types important challenges. The least problematic turned out to be the “Technology/Know-how” point (2,6%). Overall, it can be seen that start-ups in Austria are generally confronted with very different challenges and problems. Having almost no problem developing technological ideas, Austrian startups are tackled mostly with sales, cash generation and customer acquisition problems.

It is interesting how it is reported that profitability is not a problem for the majority of respondents even though 26,4% of startups have reported no revenue yet generating. It may be that these respondents did instead checked cash flow/liquidity and sales/customers acquisition problems as these are the initial reason there are no revenues and therefore, these respondents cannot comment profitability as their problem in the first place.

EU Startup Monitor 2018

Luckily, the report for the whole Europe has some compatible data, which could be additionally used for this comparison. In this case, the report provides data on key challenges for European countries on average. As it was expected, after reviewing challenges for Russian and Austrian startups along with the older data from European Startup Monitor 2016, similarly, the biggest challenge for European startups is Profitability (86,2% of European startups) (Figure 11). The other challenges include Cashflow/Liquidity (72,3%), Sales/Customer Acquisition (55,9%). Product Development and Raising Capital are almost on par with 39,7% and 37,8% respectively. Other challenges such as Recruiting, Internationalization, Team Development, Processes/Internal Organization are faced by less than 25% of European startups.

Figure 11. Greatest challenges for European startups (2018).

Source: Steigertahl, L. et al. (2018) EU Startup Monitor: 2018 Report. Available at: http://www.startupmonitor.eu/ (Accessed: 2020).

Comparison findings for key challenges:

Comparing the given reports on the point of key challenges is a tough task to tackle. The reason for that is difference in methodology of both reports. However, it is possible to notice some similarities and differences to form conclusions.

Firstly, it is clear that both countries' startups tend to have problems related to funding and financing as the most challenging as it was predicted in H1. However, this hypothesis (H1) is only confirmed partly for Austria, due to the fact that Austrian startups have reported that Capital acquisition (Fundraising) in relatively not a huge challenge (6,7% avg. From Figure 10). It seems as though it is not a problem to acquire funds for the majority of Austrian startups, it is still a problem to continue on the sales growth path. This path in this case is meant by the author as 1) customer acquisition >> 2) sales >> 3) cash flow/liquidity. Similar, though higher in percent data is presented by EU Startup Monitor with 37,8% of startups seeing raising capital as a key challenge. For Russian startups, 63% of startups are having problems with money for development and growth. Consequently, for European and Russian startups the Hypothesis 1 (H1) is confirmed, with Austrian startups being the exception.

Second finding. As it is reported, the Russian startups are signaling no to low interest of strategists (in this case it can be read, for example, as investors or enthusiasts) in innovative companies and business (45%). It seems as there is no similar challenge present for Austrian startups. That could mean that either this was not an option in the interview, or there are really no complains in the case of low interest in startups. Therefore, it would be interesting to see how Austrian and Russian startups differ in terms of rating the support from the government and public institutions, as this is closely related to interest in innovations. Especially it is a great suggestion to investigate, as only Russian startups report no to little support from the government (19%).

Finally, the third point. It is not self-evidently possible in this case, with the information at hand (both reports) to have a valid confirmation nor a disapproval for hypothesis 3 (H3), which suggests there should be a greater difference for financing/funding related and other challenges for Austrian startups than it is for the Russian ones. Judging from the maximum of 20-28% for any challenge, evidently from the Austrian report, on average around 72-80% of Austrian startups did not have many challenges reported. Clearly, we do not know how exactly the methodology went for the interview in Austrian Startup Monitor 2019. In addition, fundraising is not a big challenge (avg. 6,7%), whereas customer acquisition/sales (avg. 19,8%) and cash flows/liquidity (avg. 18,5%) are the most reported of all. Consequently, even without calculations it is evident that the difference between funding/financing related challenges is not high for Austrian startups, but rather, both highest reported challenges are leveled down by fundraising/capital acquisition challenge, which makes the category of funding/financing related challenges do not stand out much (as it was already covered partly in the first finding). Therefore, it is already possible to mark hypothesis 3 (H3) as not confirmed.

Additionally, an interesting point to be made is that in the Russian startup report, the results show that 1 in 5 Russian startups report low-no government support (19%), but in the Austrian report, even with no similar challenge, the only challenge, which can be connected to government support in a form of, for example, winnable grants, is Capital acquisition(Fundraising). This challenge is reported relatively uncommon (6,7%). Consequently, it can be suggested that in Austria there are less to none unsatisfaction with the government support, compared to Russia. This will be discussed in further comparison part.

3.2.3 Support from the government and public institutions

This point represents the data in both reports, which could explain the relation with governmental programmes and institutions with startups in both countries.

Startup Barometer 2019

The authors claim that in 2019 report there is a deeper research in terms of how startups feedback other representatives of the ecosystem. The figure below (Figure 12) demonstrates the answer to the first question:

Figure 12. Government and institution support for Russian startups in 2019.

Re-compiled and translated by the author from source: Soloviev, A. et al. (2019) Startup Barometer: Technology Enterprise Market Research in Russia. Available at: https://vc-barometer.ru/startup_barometer_2019 (Accessed: 2020).

When asked about support from state development institutions, 39% of founders said they did not feel any of the above benefits for their business. One third of the respondents singled out the activities of the Foundation for Assistance to Small Innovative Enterprises (Bortnik), and a quarter of the respondents mentioned the work of the IIDF. The activities of Skolkovo benefit the business of 22% of its founders.

In the other survey, there was no graph presented with the results, however, here is a small mention of the results on the question in which types of support institutions the startups have participated. 66% of respondents have participated in accelerators and startup competitions. 45% of them participated in the state accelerator, more than a quarter in the private accelerator, and 16% in the corporate accelerator. In the "Other" response, several founders said that they had participated in several different accelerators.

Interestingly enough, the results show that many startups participate in private and state startup accelerators or competitions, however, Figure 12 shows that not always that is the case. In addition, in the previous comparing segment, it is mentioned that 19% of the respondents say there is a lack of support from the government and supporting institutions such as accelerators.

Austrian Startup Monitor 2019

As for the Austrian report, there is a part of the interview, which asks startups how would they rate the level of cooperation with public facilities. The authors conclude that from necessary administrative procedures to new regulations, startups have many points of contact with the public sector (government).

According to the authors (Figure 13), experience in cooperation with public institutions has improved slightly compared to the report of 2018: before it was rated 2,9 on a scale of 1 (very negative) to 5 (very positive) at the time, this year it is rated 3,2 points on average, which is, however, still not considered positive. It also seems as if startups are not strongly happy (2,9) with the service platform for business (Цsterreich, no date). The least rated turned out to be the interest of the federal government with only 2,3 out of 5. A bit higher (2,7), though, not much is the interest from EU institutions outside of Austria, with the experience of working with EU institutions being rated as 2,6.

Figure 13. Cooperation with public institutions of Austrian startups. Number of respondents = 567.

Re-compiled and translated by the author from source: Leitner, K-H., Zahradnik, G., Dцmцtцr, R., Jung, S. and Raunig, M. (2020) AUSTRIAN STARTUP MONITOR 2019. Vienna. Available at: https://austrianstartupmonitor.at/ (Accessed: 17 March 2020).

Comparison findings for support from the government and public institutions:

For both countries it seems as there is not enough support from the government or institutions. The main similarity is in previously reported challenge of low interest from strategists in Russian startups (45%) and this Austrian report shows that federal government is not so heavily interested in supporting startups (2,3). For both countries, it seems as if support from the government is not rated highly. In other cases, as, for example experience with public institutions Austria has a rather neutral experience 3,2 out of 5 and, similarly, Russia has 39% of startups which had no help from public or private institutions. From the available data and the possible concluded statements, it is not clear whether or not hypothesis 2 can be confirmed. While it would be possible with more precisely defined and more comparable questions for interviews in both reports, for the current data it is possible to conclude that both countries have many startups with the negative-neutral opinion on public institutions and governmental support. In addition to this, Austrian startups reported that they expect the most out of government more incentives for raising capital (46,6% of seed stage startups and 46,1% of early startup growth phase) and Russian startups reported that financial support is what they need the most out of government, public and private institutional support (72%). This adds up on to the concluding point above.

3.2.4 Sources for funding and financing

As for the next category for comparison. It was possible to see one of the most important questions in both reports, which refers to what kind of funding/financing ways startups use in Russia and Austria. Additionally, data from EU Startup Monitor 2018 is discussed.

Startup Barometer 2019

As it is shown in Figure 14, in Russia the majority of startups use their own funds to kickstart their business (63%), which confirms hypothesis 4 for Russian startups in seed stage. That is, however, lower than it was last year in Startup Barometer 2018 by Soloviev et al. (2018). The authors mention that it was a surprising finding for them to have 16% of startups reporting they have been using grants for launching their startup, because in 2018's report this was only 2%. The third and fourth positions are held by Private investors with friends&family (9%) and Strategic investors (5%).

Figure 14. Sources of funding for launching a startup for Russian startups in 2019.

Re-compiled and translated by the author from source: Soloviev, A. et al. (2019) Startup Barometer: Technology Enterprise Market Research in Russia. Available at: https://vc-barometer.ru/startup_barometer_2019 (Accessed: 2020).

Figure 15. Sources of funding for Russian startups at the moment in 2019.

Re-compiled and translated by the author from source: Soloviev, A. et al. (2019) Startup Barometer: Technology Enterprise Market Research in Russia. Available at: https://vc-barometer.ru/startup_barometer_2019 (Accessed: 2020).

As for the current state (Figure 15), one third of Russian startups still use the same means of supporting their business as they were in the kickstart/launch stage (Figure 15). Some, which already have sales and cash flows, can support themselves, but these are only less than a third of all (30%). 14% of startups required additional self-funding rounds from the founders (14%). As compared to the launch stage, where 16% of Russian startups were using grants for kickstarting their business, now it is only 9%. External capital is used by 9% of startups.

Figure 16. Distribution of funds sources after launch for Russian startups in 2019.

Re-compiled and translated by the author from source: Soloviev, A. et al. (2019) Startup Barometer: Technology Enterprise Market Research in Russia. Available at: https://vc-barometer.ru/startup_barometer_2019 (Accessed: 2020).

As can be seen also in the figure 16, the authors of the report conclude that those startups, which are launched self-funded are able to “live” on their own sales revenue as the business develops (37%), unlike those who have received grant or external financing from a strategic investor (18%, 18% and 14%). The authors suggest, that those who have invested personally in their business to be born are the most stimulated to reach results when the business is developed, in contrast to those who were externally financed. Additionally, the majority of those who are initially funded by private investors or friends&family are either living on the same funds left or self-fund (45% and 30%). Interesting point is that those, who started by having a grant funds are receiving new grants again to keep their business alive.

Austrian Startup Monitor 2019

Austrian startup report has a general graph for reporting sources of funding, which is not separated into different stages of startup lifecycle as it is in Startup Barometer. However, similar to the section about startup challenges, here startups are grouped into three types: academic spin-offs, corporate spin-offs and intedendent foundations (Figure 17).

Figure 17. Funding sources for Austrian startups. Number of respondents = 441.

Re-compiled and translated by the author from source: Leitner, K-H., Zahradnik, G., Dцmцtцr, R., Jung, S. and Raunig, M. (2020) AUSTRIAN STARTUP MONITOR 2019. Vienna. Available at: https://austrianstartupmonitor.at/ (Accessed: 17 March 2020).

Figure 17 is an overview of all sources of funding a startup in Austria. As it was expected with a discussion on hypothesis 4, the most common source of financing is self-funding (Saving): 2 out of 3 startups (69%) are self-funded. The second most important source of financing for Austrian start-ups is national public grants and subsidiries with almost half startups using them (48%). Every fourth start-up (27%) receives financing from business angels. About one in five start-ups (19%) received financial support from family members and friends. 16% of startups have received funding from EU institutions. As can be related to the previous medium rated support from institution support - only 15% of startups receive funds from incubators, accelerators and "company builders". 14% of Austrian start-ups have raised venture capital and 8% have carried out a crowdfunding or crowdinvesting campaign. Bank loans are used by around 19% and cash flows from established sales account for 23%. The recent ICO boom in 2017-2018 is now slowed down considerably and there are not much ICO funded projects as can be expected - below 1%.

If one takes another perspective it the presented Figure 17, it can be seen that funding sources are different for types of startups. Taking a look at national funding: it is much more popular among academic spin-offs (62%), than other types of startups. Independently founded startups prefer business angels support more than other types. In contrast, bank loans as a source of financing are more important for spin-offs from companies (24%) than for academic spin-offs (17%) and independent start-ups (18%). A similar picture emerges for start-ups financed by venture capital: Their share is higher in the group of corporate spin-offs than in the other two groups. In contrast, support from "family& friends" is far less important in corporate spin-offs (9%) than in academic spin-offs (20%) and independent start-ups (22%). Incubators, company builders and accelerators are comparatively more important for academic spin-offs than for the other two types of start-up. Crowdfunding and crowd investing are used most intensively by independent start-ups.

Interesting mention can be made for difference with last year results for the same question in ASM'18 by Leitner, K.H., Zahradnik, G., Dцmцtцr, R., Raunig, M., Pardy, M. and Mattheiss, E. (2018). There are almost no different positions available, exception is made for business angels and cash flows: both of these had around 7-10% higher values last year.

EU Startup Monitor 2018

The data from the latest European report is also available for sources of funding (Figure 18). European startups tend to use their own funds (savings of founders are used by 77,8% of European startups, similarly to the other reports (European 2016, Russian 2019 and Austrian 2020).

Figure 18. Greatest challenges for European startups (2018).

Source: Steigertahl, L. et al. (2018) EU Startup Monitor: 2018 Report. Available at: http://www.startupmonitor.eu/ (Accessed: 2020).

Comparison findings for funding and financing sources:

As it can be seen from the composed Figures 14-18, there is a considerable similarity in some of the options for funding and financing. First of all, the most noticable finding confirms hypothesis 4 (H4). Both countries and have the majority of startups being self-funded (Russia 63%; Austria 69%) as this is mostly would be the case for most startups worldwide and in Europe (77,8%). Secondly, grants play a relatively big role in funding options for startups in Russia (16-32% depending on the stage) and Austria (48%). Though for Austria it seems as they are more common for startups than in Russia, which can signal for a more mature funding opportunity environment in Austria. In addition, almost 22% of startups in Russia use their cash flows for keeping their business running and it is similar for Austria with 23% of startups using cash flows. Finally, another point to notice is that it seems as in Austria accelerators are more active and/or popular (15%), while the number for Russia is somewhere between 1 and 7% depending in the startup stage (in we consider that in the current stage the authors included accelerators/incubators in the “Other” category).