Empirical analysis of Hungarian firms according to venture capital investment criteria

Abstract

Over the past decade the venture capital industry has become more and more prominent, not just on a global level, but in Hungary, too. Thanks to the JEREMIE Program a large number of new venture capital firms are located in our country, and therefore an investment wave has started. The main topic of the paper relates to the selection of firms for venture capital investment; therefore, in the first part of the study I briefly summarize a general venture capital investment process, highlighting both the selection process and the criteria used for selection. Then I propose 3 indexes (trustworthiness index, openness index, investment index), which we have created to help venture capitalists to decide whether the targeted enterprises are appropriate for them, or not. In the main part of the paper I provide a classification of micro- and small sized Hungarian firms based on my own survey, and I analyze what kind of relationship exists between the proposed indexes and the type of the classified firms. The result of the classification is that I identify four main firm types and, based on statistical tests, it can be said that there is no significant relationship between the trustworthiness index and the clusters, but that there are between the two other indexes and the clusters.