Title: Question of software start-up finance: system dynamics simulation analysis

Authors: Olli-Pekka Hilmola

Addresses: Lappeenranta University of Technology, Kouvola Research Unit, Prikaatintie 9, FIN-45100 Kouvola, Finland

Abstract: Frequently, software start-up success is explained with operational excellence of a company and pure technological right choices. However, in this research, we try to shed a light, how different amounts of completed venture capital investments could improve software start-up success. Our research results show that operational software company performance is behaving like a platform in venture capital improvement efforts, but positive performance could be improved considerably with right magnitude of financing. On the basis of our preliminary analysis, correct amount of finance will increase Net Present Value (NPV) of an investment from 17% to 74%. We also noticed that very large scale lump-sum financing in the very beginning will also yield significantly better performance. However, low operational performance will only destroy more capital, and larger investment amounts will turn into considerable disadvantage.

Keywords: software start-ups; R&D; research and development; venture capital; system dynamics; optimisation; start-up financing; operational performance.

DOI: 10.1504/WRSTSD.2009.031841

World Review of Science, Technology and Sustainable Development, 2009 Vol.6 No.2/3/4, pp.204 - 216

Published online: 25 Feb 2010 *

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