Relationship Financing for Start-ups: An Empirical Analysis of Different Investor Types

Start-ups often lack certain knowledge and skills and are in the need of external assistance. If this external help is combined with capital we can talk about relationship financing or smart capital. In a heterogeneous financial system such as the one in Germany, which type of financier supplies ‘true’ smart capital to entrepreneurs, is still an open question. To answer this question, a survey was conducted among 85 German suppliers of start-up finance. The results show that all types of financiers deliver some sort of smart capital. However, the levels of information flows within a financing relationship vary strongly between the different investors.