Skip to main navigation menu Skip to main content Skip to site footer
FrancoAngeli Journals

Regular Articles

Early View

Determinants of Agri-food Investment from Fund Managers’ Viewpoint

DOI
https://doi.org/10.3280/ecag2024oa15679
Submitted
marzo 28, 2023
Published
2024-05-02

Abstract

A more welcoming investment environment for the agri-food sector is envisioned as a result of the 2020 Venture Investment Promotion Act and the subsequently revised Act on Creation and Operation of Agricultural, Fisheries, and Food Investment Funds in South Korea. This study seeks to identify strategies to encourage venture investment for agri-food entrepreneurs by relying on these new legal environments. This study uses the Analytic Hierarchy Process to assess factors that facilitate investing based on a survey of fund managers and investment analysts who have invested in agri-food products. The findings indicate that the readiness of agri-food enterprises to adopt corporate-like management practices and their willingness to pursue commercialization are the primary determinants of investment facilitation. Deregulated investment environments and enhanced investor incentive systems rank as the second and third most significant determinants. The results offer insights into strategic policy initiatives aimed at increasing investment for startups, young entrepreneurs and venture farmers.

References

  1. Agricultural Policy Insurance & Finance Service (APFS) (2020). 10-years progress of the food, agriculture, forestry and fishery fund of funds. Department of investment operations, Agricultural policy insurance & finance service.
  2. Baum, J., & Silverman, B. (2004). Picking winners or building them?: Alliance, intellectual, and human capital as selection criteria in venture financing and performance of biotechnology startups. Journal of Business Venturing, 19, 411-436.
  3. Bell, J., Dorsey, R., & Hamm, J. (2016). The Simple Agreement for Future Equity: Advantages, disadvantages and tax treatment. Taxes, 84(2): 43-59.
  4. Boocock, G., & Woods, M. (1997). The evaluation criteria used by venture capitalists: Evidence from a UK venture fund. International Small Business Journal, 16(1), 36-57.
  5. Cassar, G. (2014). Industry and startup experience on entrepreneur forecast performance in new firms. Journal of Business Venturing, 29(1), 137-151.
  6. Choi, M., & Kim, M. (2018). Review of Act on the promotion of venture investment and future tasks. Kookmin Law Review, 42, 105-129.
  7. Chung, N., Lee, W., & Shin, Y. (2023). A historical review of agricultural finance in Korea and its implications. The Review of Business History, 38(2), 49-70.
  8. de Crescenzo, S. (2018). SAFE gives startups, investors a “debt free” finance route. San Diego Business Journal, January 8, 14.
  9. Dhochak, M., & Sharma, A. (2016). Identification and prioritization of factors affecting venture capitalists’ investment decision-making process: An analytical hierarchal process (AHP) approach. Journal of Small Business and Enterprise Development, 23(4), 964-983.
  10. Franke, N., Gruber, M., Harhoff, D., & Henkel, J. (2006). Why you are is what you like-similarity biases in venture capitalists’ evaluations of start-up teams. Journal of Business Venturing, 21(6), 802-826.
  11. Gompers, P., Gornall, W., Kaplan, S., & Strebulaev, L. (2021). How venture capitalists make decisions: An inside look at an opaque process. Harvard Business Review, 99(2), 70-80.
  12. Kollmann, T., & Kuckertz, A. (2010). Evaluation uncertainty of venture capitalists’ investment criteria. Journal of Business Research, 63(7), 741-747.
  13. Kim, S., & Kim, H. (2019). An empirical study on investment decision-making factors of personal investment association: Focused on investment decisionmaking factors of venture firms. Korean Journal of Business Administration, 32(11), 2051-2084. Doi: 10.18032/kaaba.2019.32.11.2051.
  14. Kim, M., & Yoon, C. (2019). A study on the analysis of financial support for inclusive finance in the agricultural sector. Korea Rural Economic Institute report, November.
  15. Koo, J. (2022). A study on the criteria and importance of investment decisionmaking of Korean Venture Capitalists. Unpublished doctoral dissertation, Seoul, Korea University.
  16. Lee, H. (2019). A study on institutional measures to promote venture investment. Korean Commercial Law Association, 37(4), 171-201. Doi: 10.21188/CLR.37.4.4.
  17. Lee, S. (2019). An experimental study on the investment decision criteria of Korean venture capitalists: Newness, readiness, and founders’ experiences. Unpublished doctoral dissertation, Seoul, Kukmin University.
  18. Lee, S., & Cho, D., (2020). A case-based evaluation model of venture investment contract method and its application to ‘simple agreement for future equity’. The Journal of International Trade & Commerce (JITC), 16(3), 371-389. Doi:10.16980/jitc.16.3.202006.371.
  19. Lim, H., Kang, J., & Ahn, B. (2020). Analysis on establishing the direction for improving GAP certification standards using analytic hierarchy process. Korean Journal of Food Marketing Economics, 37(3), 117-135. Doi: 10.47085/KJFME.37.3.5.
  20. Lahr, H. and Mina, A. (2016). Venture capital investments and the technological performance of portfolio firms. Research Policy, 45(1), 303-318.
  21. MacMillan, I., Zemann, L., & Subbanarasimha, P. (1987). Criteria distinguishing successful from unsuccessful ventures in the venture screening process. Journal of Business Venturing, 2(2), 123-137.
  22. Mason, C., & Stark, M. (2004). What do investors look for in a business plan?: A comparison of the investment criteria of bankers, venture capitalists and business angels. International Small Business Journal Researching Entrepreneurship, 22(3), 227-248.
  23. Min, C. (2015). Analytic hierarchy process: Smart management science. Saengneung Publisher.
  24. Myers, S., & Majluf, N. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economic, 13(2), 187-221. Doi: 10.1016/0304-405X(84)90023-0.
  25. Nam, J. (2022). Status and improvement of Korean policy funds. Korea Capital Market Institute Issue report, March.
  26. Narayansamy, C., Hashemoghli, A., & Rashid, R. (2012). Venture capital preinvestment decision making process: An exploratory study in Malaysia. Global Journal of Business Research, 6, 5, 49.
  27. Oh, J., & Jung., J. (2020). The introduction and effect of SAFE in equitybased crowdfunding. Korean Journal of Financial Studies, 49(2), 189-215. Doi: 10.26845/KJFS.2020.04.49.2.189.
  28. Park, S. (2018). The enforceability of venture capital terms under the Korean law: With a focus on the redeemable convertible preferred shares. Korean Commercial Law Association, 37(2), 383-419. Doi: 10.21188/CLR.37.2.11.
  29. Park, J., Kim, M., Eom, J., & Han, B. (2017). Establishment of the early investment market for the agri-food industry and long-term development for agri-food fund of funds. Korea Rural Economic Institute report, November.
  30. Park, Y., & Chun, C. (2018). Economic implications and legal issues of the implementation of SAFE in Korea. Korea Capital Market Institute Issue report, October.
  31. Perry, J., Bolanos, M., Eatman, J., Hamilton, J., Wared, S. & Dansbo, E. (2022). SAFEs as (new) financing instruments. Business Law International, 23(3), 249-264.
  32. Rah, J., Jung, K., & Lee, J. (1994). Validation of the venture evaluation model in Korea. Journal of Business Venturing, 9(6), 509-524.
  33. Seong, H., (2022). A study on legal problems with SAFE(simple agreement for future equity) – Focusing on securities legalism –. Korean Commercial Law Association, 40(4), 481-517. Doi: 10.21188/CLR.40.4.11.
  34. Saaty, T. (1980). The analytic hierarchy process. McGraw-Hill, New York.
  35. Saaty, T. (1982). Decision making for leaders: The analytical hierarchy process for decisions in a complex world. Belmont, CA, Wadsworth.
  36. Saaty, T. & Vargas, L. (2012). Models, methods, concepts & applications of the analytical hierarchy process. 2nd Edition. New York, Springer.
  37. Son, S. (2013). Assessment, analysis and prospect of Korea’s policy loan. Korea Institute of Finance report, December.
  38. Tyebjee, T., & Bruno, A. (1984). A model of venture capitalist investment activity. Management Science, 30(9), 1051-1066.
  39. Vinig, T., & de Haan, M. (2008). How do venture capitalists screen business plans: An art or escience? Evidence from the Netherlands and the USA. All Sprouts Content 6. -- https://aisel.aisnet.org/sprouts_all/6.
  40. Yang, Y. (2019). Alternative of building up the equity financing base of small and medium ventures including startups to boost up their innovative growth - Validating review over the Act of promoting venture investment including SAFE rule. Journal of Law, 30(2), 121-148. Doi: 10.33982/clr.2019.05.30.2.121.
  41. Wells, W. 1974. Venture capital decision-making. Unpublished doctoral dissertation: Pennsylvania, Carnegie Mellon University.
  42. Westaway, K. (2023). Understanding SAFE Agreements: Benefits and Risks for Startups. Forbes, January 6.
  43. Wuebker, R., Hampl, N., & Wustenhagen, R. (2015). The strength of strong ties in an emerging industry: Experimental evidence of the effects of status hierarchies and personal ties in venture capitalist decision making. Strategic Entrepreneurship Journal, 9(2), 167-187.

Metrics

Metrics Loading ...