3.2.5 External capital raised so far / planned

This category for comparison was firstly planned to be the additional category, as it was expected to not bring much useful insight. However, it is worth reviewing and will be discussed on the same level as all the previous categories. External capital in this case means any sort of external investment for a startup, in other words it doesn't include startup founders' own funds and friends&family. Both reports provide data on how many startups have already raised external capital and how much they are planning to attract in the future.

Startup Barometer 2019

The Russian startup environment is presupposed to be no as developed as an Austrian one. With this presupposition in mind, it can be guessed that in Russia there are fewer external investments in startups, as the investors are much more careful where to invest their money as the trust mechanisms are not established. This can also be possibly explained by the fact that there are more investors with excessive funds, who are, consequently more risk averse in Austria, than in Russia. Nevertheless, as the authors of Startup Barometer report, the problem here is in startups, which are way out of rational thinking when thinking about their idea. The investors, even at early stages need to see a stable business models for startups, and many do not have that (Soloviev et al., 2019).

The general question for Russian startup shows that 77% of startups do not have external investment (capital) (Figure 19).

Figure 19. Whether Russian startups have external investors or not 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 the report suggests (Figure 20) - 14% of founders do not plan to raise external capital by the end of 2019, and 17% of respondents have not yet decided. A third of startups would like to attract up to $300,000, while 25% of the funders are looking to get investments of up to $1 million. The remaining 13% are counting on more impressive amounts.

Figure 20. External capital planned 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).

Austrian Startup Monitor 2019

In the Austrian report, there is a similar data gathered from startups. The report provides data on how much external capital startups already have (Figure 21) if any; and also, whether or not they plan to attract more and if yes - how much (Figure 22).

Figure 21. External capital raised so far for Austrian startups in 2019. Number of respondents = 423.

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).

The first graph (Figure 21) demonstrates how different the distribution of startups is according to size of external capital present. The most noticeable point here is that more than every second Austrian startup has external capital raised already. The largest group, i.e. 14% of the start-ups, received amounts between 150,001 and 500,000 euros. In total, one third (33,3%) of the start-ups received financing of up to 500,000 euros.

Figure 22. External capital planned to be raised in the next 12 months for Austrian startups in 2019. Number of respondents = 388.

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).

The next Figure (22) reports plans for raising capital in the next 12 months from the date of the interview. According to the report, 63% of startups are planning to raise external capital. Another group of 37% is already financed with external capital or is simply not planning any future rounds. Only 6% of startups plan to raise up to 50k EUR. 27% of Austrian startups plan to raise more than that and up to 500 000 EUR.

Comparison findings for external capital raised so far / planned:

The main reason this comparison is present in the given research is to point out the difference in external capital presence in startups for Austria and Russia. In this case, it is clearly seen how in Russia the role of external capital is much less compared to Austria. In Russia, only 23% have and the most popular plan for raising external capital is 0 to $300 000. For Austria, almost 53% of startups have external capital raised and the majority plans to receive either 500k - 1 mil. EUR or 150 - 300k EUR. Clearly, Russian startups have harder access to external capital than startups in Austria. It may be for many reasons and the discussion for these reasons calls for another research.

4. Findings and discussion

The results of this comparison of two reports show some interesting findings, which can be concluded from the results. Firstly, it is important to discuss the hypotheses, which were proposed in the introduction part of this work.

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).” - partly confirmed (Austria); fully confirmed (Russia and Europe).

As it was predicted, with the help of reports, hypothesis 1 is confirmed for Russian and European startups. however, for Austria the situation is different than it is for general picture of European countries, with much less challenge presented in acquiring capital. Therefore, hypothesis 1 is only partly confirmed for Austria and is fully confirmed for Russia and Europe.

H2. “Austrian startups are more satisfied with public sector (institutional) and government support than Russian startups.” - not confirmed.

For Russian startups it is supposedly a problem that strategists have low interest in startups. Additionally, Russian startups are signaling low interest in support from the government. For Austrian startups the support from the government is not rated highly positive. Therefore, after the comparison it can be possible to conclude that both countries have many startups with the negative-neutral opinion on public institutions and governmental support. This finding is not confirming hypothesis 2, as it is not possible to conclude from the comparison difference in relation to the government. Therefore, hypothesis 2 (H2) is not confirmed. Both Russian and Austrian startups are not satisfied with governmental and institutional support.

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.” - not confirmed.

As discussed in the findings for key challenges section, for hypothesis 3 it was requested to see a noticeable difference between funding/financing related challenges for Austrian startups. This was not the case for Austrian startups, nor it was for European or Russian. Consequently, hypothesis 3 is not confirmed.

H4. “In both Austria and Russia using personal/own funds (self-funding) is the most common way of funding/financing for startups.” - fully confirmed for Russia, Austria and also Europe.

As this is also the case for European startups, Russian and Austrian startups tend to be funded by savings of their founders. Hypothesis 4 is fully confirmed for both countries and Europe.

In the course of comparison, there were other findings worth noticing and reporting in this section.

· Firstly, while analyzing revenue statistics and statements from the authors of both reports, it was concluded that for both Russia and Austria availability of funding and financing options is key to survival. It is due to the fact that many startups are reporting no to low revenue in both countries and many startups in both countries also having challenges such as: sales, cashflows, money for development. As can be expected, similar to any new business, for startups funds is key to keeping a business alive.

· Secondly, an important point is that for Austria (in contrast to Europe) acquiring capital (fundraising) is not a big challenge, however there is a strong signal for a problem in converting an investment in stable revenues in the future. The challenges for Austrian startups may be connected with each other in a way that inability to have adequate customer acquisition leads to low sales, this therefore leads to unstable/low cashflows.

· Thirdly, the Startup Barometer report authors point to the conclusion, which in not a finding of this research, but requires a notable mention in this section. Startups which have invested in their business with their own savings have higher probability for supporting a startup with its own sales as the business develops and matures, in contrast to those, who had external funding requesting additional external funding again in maturity stage. The explanation for this lies in the motivation of those, who have personally invested in their business. These people are aware of value of their business and are more motivated, therefore, to make it profitable as much as they can.

· Finally, there are two findings: 1) In Austria, grants and accelerators are much more common for startups than in Russia; 2) Russian startups have harder access to external capital Austrian ones. Both of these findings suggest that startup environment is more mature in Austria. This statement is also backed up by the fact that even though Austrian startups are not satisfied with public institutions' and governmental support more than Russian startups do, they still have less problematic capital acquisition as they report in challenges section.

5. Limitations and implications for future research

This research has a number of limitations. These limitations are mostly due to the fact, that the research was conducted with limited time and resources.

The research did not have 1st hand data available and was not able to get close to the results of the interviews provided by the 3 reports. Fortunately, both reports were very viable for a productive comparison and an additional European report helped gather more insight. However, future research can be focused on contacting the authors of both reports and discussing with them a possibility of cooperation. That way, both parties got more data and might get more insights by comparing Russian and European startup landscapes.

The second limitation comes to mind when thinking about general comparison of Russia and Europe in terms of startup environments. A suggestion would be therefore to organize a massive comparison with the intention to gather ideas on how to modernize Russian startup environment for it to be more attractive for investment and startups foundation.

Additionally, the comparison in this research does not provide the in-depth explanations on to why results are such, due to the fact that the methodology of 2nd hand reports is not entirely clear and were not available for the author.

Perhaps, the comparison of funding/financing and support in Russia and Europe can be a good basis for another research, which could interpret the findings of this one as problem statements. For example, one might see funding/financing and support as key motivations to relocate a business internationally. This becomes especially clear, when noticing that access to financing a business is a key to survival. On the other hand, the same funding/ financing and support can be seen as a barrier for relocation. It is a good suggestion to investigate more into transforming the results of this research into a part of a much bigger research, which could provide both the scientific and business communities with much more viable and useful results.

Conclusion

As a concluding word, it would be true to note that the aim and goals of this work have led to some interesting and also some unexpected results.

First of all, it is important to note that during the literature review, it was important to see the specifics of startups lifecycle and a startup definition in general. The more there are researchers, the more there are expressions of ideas. A wide variety of startup lifecycle definitions was analyzed in the literature review section and then categorized according to the approach for defining startup lifecycle.

This leads the research to a narrower look into how a startup's lifecycle can be connected to its funding and financing stages. This connection showed that in most of the research available there are statements about financing or funding startups. Moreover, those two words are usually interchangeable and have the same meaning. Some works explain how exactly a startup can be financed, which have contributed to the review of financing options for startups. The same, or separate research can suggest the general outlook on startup environments in different countries.

Precisely this research connects the two research panels into one - assessing funding, financing and support in the context of a country's startup environment. The research then focuses on the two countries, Russia and Austria and provides a detailed comparison of the two environments in the context of funding/financing and support.

As a result, some suggestions (hypotheses) provided before the comparison are confirmed and some are not. With the additional findings provided, this research has a concluding statement, which could answer the initial research question - “What are the differences and similarities in startup funding, financing and support in Russia and in Austria?” The different findings for differences and similarities are described in the “findings and discussion” section of this research as an answer to that question.

The following master thesis first of all can help raise awareness on analysis for startup ecosystems. The results of this thesis might provide a suggestion for businesses to evaluate their environments and adjust strategy on to where to start, expand or relocate. As for the startup support institutions including accelerators, this research might encourage them to seek for other solutions on how to make a better contact and interaction with local startups.

Apart from the business implications, there might be new research topics discovered if one tries to get all the details of how funding/financing and support for startups should be leveraged. Moreover, the authors personal plans include conducting another research, which will be focused on international relocation. This master thesis will serve as a solid basis for the future work.

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