Risky Business: Venture Capital, Pivoting and Scaling

Pehr-Johan Norbäck, Lars Persson, Joacim Tåg

Research output: Book/ReportCommissioned report


The creation and scaling of startups are associated with risk-taking and different types of owners treat these risks differently. We show how an active venture capital (VC) market affects risk-taking in research and scaling decisions of startups. VC-backed startups will choose more high-risk, high-reward research and scaling strategies than independent startups. The reason is temporary ownership and the compensation structures used in the VC industry. These create "exit costs" for VC-backed startups that imply that riskier strategies pay off. We also show that the presence of an active VC market may induce startups to take more risks initially since VC firms can help startups pivot in case of failure.
Original languageEnglish
Place of PublicationStockholm
PublisherIFN - Research Institute of Industrial Economics
Number of pages48
Publication statusPublished - 2022
MoE publication typeD4 Published development or research report or study

Publication series

NameIFN Working Paper


  • 511 Economics
  • entrepreneurship
  • pivoting
  • scaling
  • venture capital


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