Do investors and entrepreneurs match?

Entrepreneurs and investors face challenges in the ‘thin market’ for early stage entrepreneurial finance. Improving the situation has been a priority of policy makers for at least a decade. But the challenges in this matching process are still poorly understood. We hypothesize that many problems originate in the discrepancy between entrepreneurs’ and investors’ perceptions of each other. To find a good match it is essential to understand what is important to your counterpart. Investors should understand what entrepreneurs are looking for and vice versa. Based on a mixed methods approach using 30 semi structured interviews and a survey this study systematically analyses where the perceptions deviate and frictions in the matching process may occur. We find that a mismatch exists in the perception of risks, the importance attached to these risks, the search channels used to find a potential partner and the evaluation criteria applied in evaluating a proposition (i.e. exit, innovativeness, capabilities of teams). The differences seem even more pronounced in the green tech sector, although our data is not rich enough to derive strong statistical proof of that. Our results call for policy measures to increase market transparency and informing both sides of the searching process to create a mutual understanding of the investment process, perhaps especially in new and capital intensive sectors like clean- and greentech venturing.