Handbook of Research on Venture Capital
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Handbook of Research on Venture Capital

  • Handbooks in Venture Capital series

Edited by Hans Landström

This Handbook provides an excellent overview of our knowledge on the various facets of managerial venture capital research. The book opens with a thorough survey of venture capital as a research field; conceptual, theoretical and geographic aspects are explored, and its pioneers revisited. The focus then shifts to the specific environs of venture capital.
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Chapter 7: The Venture Capital Post-investment Phase: Opening the Black Box of Involvement

Dirk De Clercq and Sophie Manigart.

Extract

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...

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