Venture capital and strategic development of innovative business

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VENTURE CAPITAL AND STRATEGIC DEVELOPMENT OF INNOVATIVE BUSINESS

ZORYNA YURYNETS,

ROSTYSLAV YURYNETS

Abstract

venture capital strategic innovative

One of the most important sources for improving the financial support of innovative activity is venture capital. The development of venture financing in developed countries is one of the defining areas of support for medium and small innovative businesses. The purpose of the article is to identify the key features of venture capital, the selection of structural characteristics of venture capital, and the functional features of venture financing for the strategic development of innovative businesses. The survey is based on the following methods: analysis, systematization, and generalization to identify the key features of venture capital, as well as to select structural characteristics of venture capital, and the functional features of venture financing; tabular representation for the visual display of the results of research and analytical data. The article analyzes the interpretations of venture capital. A significant expansion of the key features of venture capital was noted. The structural characteristics of venture capital for the strategic development of innovative businesses are highlighted, which are systematized according to the following signs: elements of the classic form of venture capital, functions of venture capital, characteristics of the venture capital market, phases of the venture capital investment process, reasons for the refusal to receive venture capital, results from the implementation of venture capital at the macroeconomic level. Functional features of venture financing for the strategic development of innovative businesses must be considered in the context of such features forms of venture financing, types of venture financing, features that are characteristic of venture financing, steps of the venture financing process, stages of venture financing, the most common exit strategy for venture capital investors, principles of venture financing, advantages of venture financing, disadvantages of venture financing. The obtained results are the basis for further scientific research in the part of venture financing of the strategic development of innovative businesses in Ukraine and attracting investments for the development of innovative activity.

Keywords: venture capital, venture financing, innovative activity, innovative businesses, strategic, development, process, startup, investment, venture fund, risk.

АНОТАЦІЯ

Юринець Зорина, Юринець Ростислав. Венчурний капітал та стратегічний розвиток інноваційного бізнесу.

Одним із найважливіших джерел удосконалення фінансового забезпечення інноваційної діяльності є венчурний капітал. Розвиток венчурного фінансування в розвинених країнах є одним із визначальних напрямків підтримки середнього та малого інноваційного бізнесу. Метою статті є визначення основних ознак венчурного капіталу, виділення структурних характеристик венчурного капіталу та функціональних особливостей венчурного фінансування. Дослідження базується на таких методах: аналіз, систематизація та узагальнення для виявлення основних ознак венчурного капіталу, а також виділення структурних характеристик венчурного капіталу та функціональних особливостей венчурного фінансування; табличне представлення для наочного відображення результатів дослідження та аналітичних даних. У статті проаналізовано трактування венчурного капіталу. Відзначено значне розширення ключових характеристик венчурного капіталу. Виділено структурні характеристики венчурного капіталу, які систематизовано за такими ознаками: елементи класичної форми венчурного капіталу, функції венчурного капіталу, характеристика ринку венчурного капіталу, фази процесу венчурного інвестування, причини відмови від отримання венчурного капіталу, результат реалізації венчурного капіталу на макроекономічному рівні. Функціональні особливості венчурного фінансування необхідно розглядати в контексті таких ознак: форми венчурного фінансування, види венчурного фінансування, риси, характерні для венчурного фінансування, етапи процесу венчурного фінансування, етапи венчурного фінансування, найбільш поширені стратегії виходу інвесторів з венчурного капіталу, принципи венчурного фінансування, переваги венчурного фінансування, недоліки венчурного фінансування. Отримані результати є основою для подальших наукових досліджень у частині венчурного фінансування стратегічного розвитку інноваційного бізнесу в Україні та залучення інвестицій для розвитку інноваційної діяльності.

Ключові слова: венчурний капітал, венчурне фінансування, інноваційна діяльність, інноваційний бізнес, стратегічний, розвиток, процес, стартап, інвестиції, венчурний фонд, ризик.

INTRODUCTION

In the modern world, it has been proven that investments in the development and implementation of innovations are the most profitable (Zhang et al., 2012). It guarantees the highest return, laying a reliable foundation for maintaining the innovative potential of business at a high level, ensuring the country's competitiveness. The main reason holding back the strategic development of innovative businesses in Ukraine is insufficient funding (Yurynets, 2016). The problem of innovative business is the problematic financing of innovative projects with high risk. New alternative sources of investment resources are needed to improve the financial support of the innovative activity. One of the most important sources is venture capital. The development of venture financing in developed countries is one of the defining areas of support for medium and small innovative businesses, financing of scientific and research works. Despite the numerous risks associated with venture capital, many companies prove that this form of investment can give an investment «push» and lead to the creation of a real giant. Companies using this financing form include Amazon.com, Facebook, and Google (Bustamante et al., 2021). Without the support of private investors and venture capital, it would be difficult for the founders of these global brands to turn their innovative ideas into businesses.

Thus, the development of venture financing, the accumulation of financial resources, and the effective use of venture capital for the development of innovative businesses become an important issue for the state, especially after the end of the war. This requires a deeper understanding of the features of venture financing in the strategic development of innovative businesses.

THEORETICAL BACKGROUND

The problem of venture financing of innovation activity, effective formation, and use of venture capital is not new for scientists. In the scientific publications of scientists (Block et al., 2019; Bustamante et al., 2021; Williams, 2017; Shao & Sun, 2021) the main attention is paid to the evolution of venture business development, the role of venture investments in national and global innovation processes, and the foreign experience of venture financing of innovation activity. Among the scientists who actively researched the problem of the formation and use of venture capital, we can single out Frimpong et al. (2021); Gutterman (2022); Park and LiPuma (2020); Rudra et al. (2020). They studied changes in the global venture capital market, conditions of venture capital investment, and startup requirements. Researchers among others have also studied the venture financial strategies, venture funds, and availability of investment to the business. The availability of venture funds is one of the sources of competitiveness of innovative businesses and by extension, economic efficiency. Many scientists in the field of business management, such as Pradhan et al. (2019); Siddiqui et al. (2016); Zhang et al. (2012) have investigated the consequences of long-term (strategic) and short-term financing of innovative businesses. The authors paid much attention to the process of venture financing, the differences between venture financing and traditional investing, and the stages of venture financing.

However, there is still no research on the structural and functional features of venture capital and venture financing and their role in the strategic development of innovative businesses.

RESEARCH OBJECTIVE, METHODOLOGY AND DATA

The research methodology in the article develops the idea of «venture capital as an effective tool for creating a new business», where venture capital is the basis for solving the problem of lack of funds in the innovation sector in the future. Therefore, the formation of structural characteristics and functional features of venture capital should be carried out taking into account the strategic development of innovative business. The substantiation of the relevance of the problem is confirmed by the results of studies (Pradhan et al., 2019), which proved the impact of venture financing on the successful development of innovative projects, and startups, taking into account the system of strategic tasks. The materials of the article are based on research by scientists regarding the use of venture capital from a strategic perspective. Analysis of the features of venture capital made it possible to identify signs, structural characteristics and functional features of venture capital for the strategic development of innovative businesses. The systematization made it possible to group the key features of venture capital, to develop a classification of structural characteristics and functional features of venture capital for the strategic development of innovative businesses. Generalization is necessary to form a research conclusion. The conclusions are the basis for the justification of the prospects for the development of venture funds in Ukraine in the future and further research on venture financing of innovative activities. The article uses tabular representation for the visual display of the results of research and analytical data. The purpose of the article is to identify the key features of venture capital, the selection of structural characteristics of venture capital, and the functional features of venture financing for the strategic development of innovative businesses.

RESULTS AND DISCUSSION

An innovative business that needs venture capital is a young business structure that has growth potential and attracts venture capital to implement innovative projects, modernization, or technological re-equipment of production, bringing new products (works, services) to the market, which helps to increase their market value. An innovative business that operates in a growing market has an idea, and is looking for investment to implement it, should consider the possibility of using venture capital. This is a form of financing promising strategic innovation projects of small and medium-sized businesses. Venture capital is a special form of investment that can benefit innovative businesses and venture capital funds in the future. Venture capital provides financing for product development or further entry into international markets.

The definition of the concept of «venture capital» is given in Table 1.

Tab. 1

Interpretation of the concept of «venture capital»