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Open Access
Article
Publication date: 20 June 2022

Kimberly Gleason, Yezen H. Kannan and Christian Rauch

This paper aims to explain the fundraising and valuation processes of startups and discuss the conflicts of interest between entrepreneurs, venture capital (VC) firms and…

6988

Abstract

Purpose

This paper aims to explain the fundraising and valuation processes of startups and discuss the conflicts of interest between entrepreneurs, venture capital (VC) firms and stakeholders in the context of startup corporate governance. Further, this paper uses the examples of WeWork and Zenefits to explain how a failure of stakeholders to demand an external audit from an independent accounting firm in early stages of funding led to an opportunity for fraud.

Design/methodology/approach

The methodology used is a literature review and analysis of startup valuation combined with the Fraud Triangle Theory. This paper also provides a discussion of WeWork and Zenefits, both highly visible examples of startup fraud, and explores an increased role for independent external auditors in fraud risk mitigation on behalf of stakeholders prior to an initial public offering (IPO).

Findings

This paper documents a number of fraud risks posed by the “fake it till you make it” ethos and investor behavior and pricing in the world of entrepreneurial finance and VC, which could be mitigated by a greater awareness of startup stakeholders of the value of an external audit performed by an independent accounting firm prior to an IPO.

Research limitations/implications

An implication of this paper is that regulators should consider greater oversight of the startup financing process and potentially take steps to facilitate greater independence of participants in the IPO process.

Practical implications

Given the potential conflicts of interest between VC firms, investment banks and startup founders, the investors at the time of an IPO may be exposed to the risk that the shares of the IPO firms are overvalued at offering.

Social implications

This study demonstrates how startup practices can be extended to the Fraud Triangle and issue a call to action for the accounting profession to take a greater role in protecting the public from startup fraud. This study then offers recommendations for regulators and standards entities.

Originality/value

There are few academic papers in the financial crime literature that link the valuation and culture of startup firms with fraud risk. This study provides a concise explanation of the process of valuation for startups and highlights the considerations for stakeholders in assessing fraud risk. In addition, this study documents an emerging role for auditors as stewards of proper valuation for pre-IPO firms.

Details

Journal of Financial Crime, vol. 29 no. 4
Type: Research Article
ISSN: 1359-0790

Keywords

Content available
Article
Publication date: 1 March 2005

Joseph E. Levangie

Many entrepreneurs want to reach high to the heavens to achieve unlimited success. These hardworking, often underappreciated, venturers often crave fame and fortune as they strive…

1162

Abstract

Many entrepreneurs want to reach high to the heavens to achieve unlimited success. These hardworking, often underappreciated, venturers often crave fame and fortune as they strive to create their personal business legacy. One strategic path many have wandered down is that of the Initial Public Offering (IPO), whereby shares of the company are sold to the public. The IPO has many strong attractions. Large amounts of capital can be brought into the company.The company's stock can be used as currency to acquire other companies. Early investors realize a good ROI. Employees can perceive real value in their stock options. Customers, banks, vendors, and other stakeholders pay more respect to the company. Is this truly the entrepreneurʼs nirvana? Or is it a case of “Be careful of what you wish for because it may really come true?” Read on.

Details

New England Journal of Entrepreneurship, vol. 8 no. 2
Type: Research Article
ISSN: 2574-8904

Open Access
Article
Publication date: 4 July 2023

Patrizia Di Tullio, Matteo La Torre, Michele Antonio Rea, James Guthrie and John Dumay

New Space activities offer benefits for human progress and life beyond the Earth. However, there is a risk that the New Space Economy may develop according to an anthropocentric…

1336

Abstract

Purpose

New Space activities offer benefits for human progress and life beyond the Earth. However, there is a risk that the New Space Economy may develop according to an anthropocentric mindset favouring human progress and survival at the expense of all other species and the environment. This mindset raises concerns over the social and environmental impacts of space activities and the accountability of space actors. This research article explores the accountability of space actors by presenting a pluralistic accountability framework to understand, inspire and change accountability in the New Space Economy. This study also identifies future research opportunities.

Design/methodology/approach

This paper is a reflective and normative essay. The arguments are developed using contemporary multidisciplinary academic literature, publicly available evidence and examples. Further, the authors use Dillard and Vinnari's accountability framework to examine a pluralistic accountability system for space businesses.

Findings

The New Space Economy requires public and private entities to embrace hybrid and pluralistic accountability for their social and environmental impacts. A new way of seeing the relationship between human life, the Earth and celestial space is needed. Accounting language is used to mirror and mobilise broader forms of responsibility in those involved in space.

Originality/value

This paper responds to the AAAJ's special issue call for examining how accountability can be ensured in the New Space Age. The space activities businesses conduct, and the anthropocentric view inspiring their race toward space is concerning. Hence, the authors advocate the need for rethinking accountability between humans and nature. The paper contributes to fostering the debate on social and environmental accounting and the accountability of space actors in the New Space Economy. To this end, the authors use a pluralistic accountability framework to help understand how the New Space Economy can face the risks emanating from its anthropocentric mindset.

Details

Accounting, Auditing & Accountability Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0951-3574

Keywords

Content available
Article
Publication date: 1 March 2006

Paul D. Broude and Joseph E. Levangie

Most entrepreneurs are continually concerned about their finances. Their companies perhaps not yet profitable, they may have a fear of “running out of dry powder.” These…

2113

Abstract

Most entrepreneurs are continually concerned about their finances. Their companies perhaps not yet profitable, they may have a fear of “running out of dry powder.” These entrepreneurs often have fallen in love with their company's technologies, products, and potential markets, but they require more resources. Invariably these emerging ventures shroud their fear of the grueling capital raising marathon by presenting voluminous business plans to potential investors. They often flaunt their “optimized business models.”” Investors, however, typically want to know why the potential investment is such a good deal. The entrepreneur often wants guidance regarding what to say to whom in a changing financing environment.

In this article, our “Practitioner's Corner” associate editor Joe Levangie collaborates with a long-time colleague Paul Broude to address how businesses should “make their capital-raising initiatives happen.” Levangie, a venture advisor and entrepreneur, first worked with Broude, a business and securities attorney, in 1985 when they went to London to pursue financing for an American startup. They successfully survived all-night drafting sessions, late-night clubbing by the company founder, and even skeet shooting and barbequing at the investment banker's country house to achieve the first “Greenfield” flotation by an American company on the Unlisted Securities Market of the London Stock Exchange. To ascertain how the entrepreneur can determine what financing options exist in today's investing climate, read on.

Details

New England Journal of Entrepreneurship, vol. 9 no. 2
Type: Research Article
ISSN: 2574-8904

Content available
Article
Publication date: 1 April 2004

Lorenda A. Naylor

288

Abstract

Details

Journal of Organizational Change Management, vol. 17 no. 2
Type: Research Article
ISSN: 0953-4814

Open Access
Article
Publication date: 31 December 2016

Min-Hwan Lee and Jae-Joon Han

The restructuring of shipping and shipbuilding companies in the midst of rapidly shrinking global shipping demand has become a prominent issue in Korea. In shipping finance, loan…

Abstract

The restructuring of shipping and shipbuilding companies in the midst of rapidly shrinking global shipping demand has become a prominent issue in Korea. In shipping finance, loan syndication featuring many creditors surges as the preferred option. However, increasing the numbers of creditors in the syndicate results in two opposite effects. First is the beneficial effect from their enhanced monitoring power. On the other hand, there is the adverse effect resulting from increased difficulty in coordination when syndicate members increase, particularly in bankruptcy. Our aim of this paper is to analyze the role of finance in the shipping and shipbuilder markets, and determine the theoretical optimal number of creditors for the shipping finance syndicate based on Bolton and Scharfstein (1996). The two issues above result from moral hazard and non-verifiability: coordination among many creditors for collection of bonds in case of default, and the enhancement of monitoring private benefit exploitation by the ship-owner during default. Considering the two conflicting forces result from an increase in creditor membership, we draw conclusions on determining the optimal number of creditors by considering trade-offs between these two factors: More creditors are preferred when the monitoring effect dominates. Otherwise, less creditors are preferred.

Details

Journal of International Logistics and Trade, vol. 14 no. 3
Type: Research Article
ISSN: 1738-2122

Keywords

Content available
Article
Publication date: 10 April 2007

172

Abstract

Details

Library Hi Tech News, vol. 24 no. 3
Type: Research Article
ISSN: 0741-9058

Open Access
Article
Publication date: 19 January 2023

Helén Anderson, Tomas Müllern and Mike Danilovic

The purpose is to identify and explore barriers to overcome for developing collaborative innovation between a global service supplier and two of its industrial customers in Sweden.

2011

Abstract

Purpose

The purpose is to identify and explore barriers to overcome for developing collaborative innovation between a global service supplier and two of its industrial customers in Sweden.

Design/methodology/approach

The research had an action-based research approach in which the researchers were interacting and collaborating with the practitioners in the companies. The empirical part includes primary data from multiple interviews, and two workshops with dialogues with participants from the involved companies. The use of complementary data collection methods gave rich input to understanding the context for collaborative innovation, and to uncovering barriers, to develop solutions for collaborative innovation. The empirical barriers were analysed using theoretically derived barriers from a literature review. The analysis generated four broad themes of barriers which were discussed and led to conclusions and theoretical and practical implications on: the customer's safety culture, the business model, the parties' understanding of innovation and the management of collaborative innovation in supply chains.

Findings

The thematic analysis generated four broad themes: the customer's safety culture, the business model, the parties' understanding of innovation and the management of collaborative innovation. These themes where analysed using theoretically derived barriers from a literature review. The industrial context, the understanding of innovation and its management created barriers.

Originality/value

The unique access to the service supplier and its two independent industrial customers adds a rich contextual framing to the process of identifying and exploring the barriers to collaborative innovation. The conclusion emphasizes the importance of an industrial business context, the business logic in terms of business models and for the understanding and management of collaborative innovation.

Details

Business Process Management Journal, vol. 29 no. 8
Type: Research Article
ISSN: 1463-7154

Keywords

Content available
Article
Publication date: 1 October 2004

76

Abstract

Details

Industrial Robot: An International Journal, vol. 31 no. 5
Type: Research Article
ISSN: 0143-991X

Keywords

Content available
Article
Publication date: 22 August 2008

N. Vardi

56

Abstract

Details

Strategic Direction, vol. 24 no. 9
Type: Research Article
ISSN: 0258-0543

Keywords

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