Decision-making Criteria and Challenges: An Analysis of Business Angels and Venture Capitalists in Sweden's Life Science Startup Ecosystem

Abstract

The Swedish life science sector is a pivotal contributor to the nation's innovation and economic development, offering vast potential for growth and value creation within the global healthcare landscape. However, navigating the investment terrain to actualise this potential requires strategic capital infusion, primarily through venture capital (VC) and business angel (BA) investments. This study aims to explore the key decision-making criteria and challenges of BAs and VCs when evaluating life science ventures for investment in Sweden. It addresses the gap in understanding the investor's standpoint, detailing the key factors influencing their investment choices and the challenges they face within the Swedish innovation ecosystem. This study uses a qualitative research methodology to gather insights from nine semi-structured interviews with a select group of BAs and VCs actively engaged in Sweden's life science sector. The objective is to unravel the complex decision-making landscape, identifying the criteria that drive investment decisions and the barriers that potentially hinder the practical application of these criteria. In this study, several key decision-making criteria used by BAs and VCs are uncovered, encompassing aspects such as risk appetite, science and technology evaluation, financial viability, milestone achievement, adaptability, trust building, networking, guidance and mentorship, and vision alignment. Additionally, it highlights several challenges confronting investors, including regulatory complexities, geographical difficulties, ecosystem influences, and Swedish-specific life science hurdles. These barriers affect the investment process and shape BAs and VCs' strategies and preferences in their pursuit of successful venture engagements. By providing a nuanced understanding of the investment dynamics from the perspective of BAs and VCs, this research contributes valuable insights into the operational frameworks of capital provision in Sweden's life science sector. The findings offer practical implications for existing and prospective investors, enhancing their strategic approaches to investment in life science ventures. The study also lays a foundation for future research to refine further and expand the knowledge base on investment decision-making in the life science sector, ultimately fostering a more vibrant and sustainable innovation ecosystem in Sweden and beyond.