Abstract:
The objectives of this study aim to explore factors that investors use for decision making to invest in business startups that base their innovation on technology, create conceptual model, develop financial decision model and test acceptance of model. The study was conducted with investors and related persons using semi-structured interview revealing that investors focus their criteria around security and growth value obtained from technological innovation. The startups that contained options or flexibility in technology or market were perceived more valuable to investors in research and development stages than in commercialization stage. Real option valuation was highly valued by technology/intellectual property licensing officers and venture capitalists but less commonly known among individual investors. The financial decision model was developed and tested using real option to value startup’s growth from innovation, affordable loss to represent startup’s security and security-potential/aspiration theory for individual investor decision making. The acceptance test with investors found the decision model to be helpful in assessing growth value and investment risk that match with their aspiration and affordable loss level. Result from case studies of startup in biodiesel production in Thailand using this decision model showed that splitting a modular project in to stages could create option value in addition to static value of project. One of the major effects of option value on investment decision making was found to be able to compensate the affordable loss. Combination of additional optional value and non-monetary quality of entrepreneur such as trustworthiness and gratitude could help increase propensity of making plunge decision to invest in technological innovation startup.
