Chapter 7: The Venture Capital Post-investment Phase: Opening the Black Box of Involvement
Dirk De Clercq and Sophie Manigart Introduction It is well documented that venture capital is a special form of ﬁnancing for an entrepreneurial venture, in that the venture capital ﬁrm is an active ﬁnancial intermediary. This is in sharp contrast with most ﬁnancial intermediaries such as banks, institutional or stock market investors that assume a passive role. Once the latter invest in a company, they may monitor the performance of the company periodically but they seldom interfere with the decision making. In order to overcome the huge business and ﬁnancial risks and the potential agency problems associated with investing in young, growth oriented ventures (often without valuable assets but with a lot of intangible investments), venture capital ﬁrms specialize in selecting the most promising ventures and in being involved in the ventures once they have made the investment. In this chapter we focus on the post-investment, but pre-exit phase of the venture capital cycle. More speciﬁcally the principal theme of this chapter is to provide an overview of relevant aspects and research ﬁndings pertaining to the period after the venture capital ﬁrm (or venture capitalist) has made the decision to invest in a particular portfolio company (or entrepreneur). We hereby focus on the interaction between a venture capitalist and the entrepreneur, rather than on ﬁnancial events as follow-on ﬁnancing rounds or exit. In essence, this overarching theme involves two important issues that will be addressed. A ﬁrst objective of this chapter pertains to categorizing the existing literature into research...
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