Criteria distinguishing successful from unsuccessful ventures in the venture screening process

MacMillan, Ian C.; Zemann, Lauriann; SubbaNarasimha, P.N.

doi:10.1016/0883-9026(87)90003-6

Cited by 427 publications

(250 citation statements)

References 2 publications

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“…Shepherd and Zarcharakis (1999) review this literature and discuss its methodological limitations. They observe that the most consistent finding across studies is the importance that venture capitalists placed on the ability of the founding team, whether it is their managerial capabilities Bruno, 1981, 1984), track record (Hutt and Thomas, 1985), staying power and familiarity with the market (MacMillan et al, 1987), or their general traits (Hisrich and Jankowitz, 1990). Naturally, venture capitalists tend to fund entrepreneurs that appear to have more skills.…”

Section: Venture Capitalists' Investment Decision Processmentioning

confidence: 87%

The advantage of experienced start-up founders in venture capital acquisition: evidence from serial entrepreneurs

Zhang

2009

Small Bus Econ

145

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. Existing literature suggests that entrepreneurs with prior firm-founding experience have more skills and social connections than novice entrepreneurs. Such skills and social connections could give experienced founders some advantage in the process of raising venture capital. This paper uses a large database of venture-backed companies and their founders to examine experienced founders' access to venture capital. Compared to novice entrepreneurs, entrepreneurs with venture-backed founding experience tend to raise more venture capital at an early round of financing and tend to complete the early round much more quickly. In contrast, experienced founders whose earlier firms were not venture-backed do not show a similar advantage over novice entrepreneurs, suggesting the importance of connections with venture capitalists in the early stage of venture capital financing. However, when the analysis also takes into account later rounds of financing, all entrepreneurs with prior founding experience appear to raise more venture capital. This implies that skills acquired from any previous founding experience can make an entrepreneur perform better and in turn attract more venture capital.JEL Classification: M13, G24

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Section: Venture Capitalists' Investment Decision Processmentioning

confidence: 87%

The advantage of experienced start-up founders in venture capital acquisition: evidence from serial entrepreneurs

Zhang

2009

Small Bus Econ

145

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“…While much of this work acknowledges the importance of value congruence, (e.g., (Adkins et al, 1994;Cable and Judge, 1997;Judge and Bretz, 1992;Meglino et al, 1992;Ravlin and Meglino, 1987), we heed the call of Meglino and Ravlin (1998) Our study also makes an important contribution to the entrepreneurship literature related specifi cally to VC selection judgments. Despite a large body of research on the most common criteria VCs use to evaluate business opportunities and founders (e.g., Hall and Hofer, 1993;MacMillan et al, 1985;MacMillan et al, 1987;Sexton and BowmanUpton, 1990;Shepherd, 1999;Tyebjee and Bruno, 1984;Zacharakis and Meyer, 1998), surprisingly few studies consider the characteristics of the decision makers themselves (i.e., the VCs). Our results indicate that VCs are not homogeneous in their decision making.…”

Section: Discussionmentioning

confidence: 99%

“…(The task is described in more detail below.) Because there are many factors that infl uence outcomes in the context of VC decision making (e.g., Hall and Hofer, 1993;MacMillan et al, 1985;MacMillan et al, 1987;Sexton and BowmanUpton, 1990;Shepherd, 1999;Tyebjee and Bruno, 1984;Zacharakis and Meyer, 1998), designing our task around decision scenarios allowed us to control for (eliminate) factors that were not germane to our specifi c research questions about the role decision makers' values play in their evaluations of founders. Also, providing information on actual opportunities has advantages over other approaches that simply ask individuals to rate or rank variables of interest in order of importance; simple ranking approaches are subject to concerns about validity because stated policy decisions may differ from actual policies (e.g., Karren and Barringer, 2002;Sherer et al, 1987;Zacharakis and Meyer, 1998).…”

Section: Methodsmentioning

confidence: 99%

“…This fund, in turn, invests in a portfolio of entrepreneurial companies (companies in which a VC invests are referred to as the portfolio companies of the VC). A key characteristic that is consistently important to VCs in evaluating which companies to invest in is the quality of the leadership (or the founder) of the new venture (e.g., Hall and Hofer, 1993;MacMillan et al, 1985;MacMillan et al, 1987;Sexton and BowmanUpton, 1990;Shepherd, 1999;Shepherd et al, 2000;Tyebjee and Bruno, 1984;Zacharakis and Meyer, 1998;Zacharakis and Shepherd, 2005). More specifically, research has focused on the human capital of the founder(s) as a critical determining factor in VC evaluations.…”

Section: The Decision Criteria Of Venture Capitalistsmentioning

confidence: 99%

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Values and judgment under uncertainty: evidence from venture capitalist assessments of founders

Matusik

George

Heeley

2008

Strategic Entrepreneurship

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We examine how judgments in the context of uncertainty vary, depending on the values of those making these judgments. We test these ideas in the context of venture capitalists' (VCs') evaluations of founders. Drawing on theoretical and empirical research on the role of values in judgment and decision making and on Schwartz's (1992Schwartz's ( , 1996 conceptualization of the basic motivational dimensions underlying human values, we hypothesize and fi nd that decision makers' process values (i.e., values governing the types of means to an end that an individual values) infl uence the perceived worth of founders' human capital. We discuss implications of these fi ndings for judgment and decision-making research, as well as practical implications for entrepreneurs and venture capitalists.

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“…Similarly, Macmillan et al (1987) identify four dimensions; the entrepreneur, the product, markets and finance. Kakati (2003:447), critical of the poor predictive power of existing models, adds two additional elements, resource based capability and competitive strategy.…”

Section: The Bell Mason Dimensions For Start-up Assessmentmentioning

confidence: 99%

Success in Israeli high-tech start-ups; Critical factors and process

2006

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This paper develops a model of the factors deemed critical for success in high-tech new ventures in Israel. Israel presents an interesting forum, geographically distant from main markets but richly endowed with human capital, new high-tech ventures are seen as an essential element of the economy. Yet, despite its importance, high-tech is characterised by risk and challenge. Consequently a model which draws on the experience of success and failures should be valuable. Our multi stage methodology enrolled the wisdom and experience of founders, managers and financiers of high-tech businesses to identify and categorise the importance of the factors and the role played by these factors. We found that success factors could be grouped as critical or as important. The first group categorised the idea, strategy, the core team's commitment, expertise and marketing as critical. Important factors were deemed to be management, customer relationships and research and development. The least important factors proved to be those external to the firm, the economy, politics and the general business environment. Overall the study emphasised that the attitudes and abilities of the core team were paramount. Although the model is based on the Israeli experience, many of the aspects are global. Consequently the study may have broad applicability.

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Criteria distinguishing successful from unsuccessful ventures in the venture screening process

Cited by 427 publications

References 2 publications

The advantage of experienced start-up founders in venture capital acquisition: evidence from serial entrepreneurs

The advantage of experienced start-up founders in venture capital acquisition: evidence from serial entrepreneurs

Values and judgment under uncertainty: evidence from venture capitalist assessments of founders

Success in Israeli high-tech start-ups; Critical factors and process

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