“In pursuit of the real deal”

Abstract

This paper investigates actual Venture Capital (VC) decision making as it occurs over time in its natural decision environment. Our qualitative analysis is based on a comprehensive, longitudinal data set comprising 11 years of archival data from a European-based VC firm. During this time, the VC managed two funds, reviewed a total of 3631 deals, and made 35 investments. By adopting this research methodology, we can overcome several limitations of post-hoc methods and experiments commonly used in this research stream, and also have the opportunity to tackle some fundamental, yet hitherto elusive research topics. For example, our findings reveal how the importance of decision-making criteria varies between different stages of the evaluation process. They also show how VC portfolio composition and VC management time serve as important, yet to-date largely neglected decision-making criteria. Implications for research and practice are outlined.

Following the Crowd—Does Crowdfunding Affect Venture Capitalists’ Selection of Entrepreneurial Ventures?

“…In addition, the success of a campaign also demonstrates a positive assessment of the new product or service and allows the entrepreneur to better assess the market potential. In turn, the demonstrated market demand could translate into a positive assessment by the VC investor since it is one key indicator when screening deals (Petty and Gruber 2011). This circumstance is clearly demonstrated in our introductory example of Lifx.…”

“…Empirical evidence concerning the value of different signals in the context of VC investing is versatile. Most importantly, Petty and Gruber (2011) conclude that a good management team with sufficient business experience pursuing a promising business idea might already be valued as a good signal from a venture capitalist's perspective. Thus, human capital characteristics play an important role in VC decision-making since human capital is also associated with venture growth (Zacharakis and Meyer 2000;Baeyens et al 2006;Newbert et al 2007;Knockaert et al 2010).…”

“…This setting is in line with signaling theory, assuming that information asymmetries can be reduced by signals that are observable and accessible before a decision is made (Spenc 1973(Spenc , 2002. Although scholarly work highlights a variety of signals, such as the human capital of the venture (Petty and Gruber 2011), patents (Zacharakis and Meyer 2000;Baeyens et al 2006;Knockaert et al 2010), or a product-oriented business model (Munari and Toschi 2011), signals generated in the context of crowdfunding as informational cue have not yet been thoroughly assessed. However, crowdfunding seems to influence the allocation of VC.…”

Entrepreneurship as Method: Open Questions for an Entrepreneurial Future

“…Franchisorfranchisee contracts have also proved useful in understanding how entrepreneurs create and manage relationships in trying to grow their ventures (Jambulingam & Nevin, 1999;Leblebici & Shalley, 1996). Other studies have looked into research (Deeds & Hill, 1999) and customer (Yli-Renko, Sapienza, & Hay, 2001) relationships and yet others have investigated the VC-entrepreneurial venture relationships through the design and ongoing management of "deals" and term sheets (Cumming, Schmidt, & Walz, 2010;Petty & Gruber, 2009). The relevant fact here is that a wide variety of contracts exist as potential data to examine how entrepreneurs craft and manage relationships with a wide variety of stakeholders.…”

SMEs perspective on venture capital investment criteria - A study of Croatian SMEs

“…Thousands of entrepreneurs every year try to obtain the necessary capital for their companies from venture capitalists (Petty and Gruber, 2009). Submitting their business proposals, they hope to meet the venture capital requirements.…”