Starting up and Growing New Businesses
Edited by Bart Clarysse, Juan Roure and Tom Schamp
Chapter 9: Venture Capitalists’ Communication and Commitment: A Practitioner’s Perspective
Dirk De Clercq and Vance H. Fried 1. INTRODUCTION This chapter focuses on how venture capital ﬁrms (VCFs) can more eﬀectively add value to their portfolio companies (PFCs) through (i) their communication both with the PFC and internally within the VCF and (ii) their commitment to the PFC. To the entrepreneur, VCF value added can be crucial to the success of his or her company (that is, the PFC). To the VCF, quality PFC investments are important to enjoy high returns. Although they are not the only driver of PFC performance, VCFs can often signiﬁcantly enhance PFC performance by fulﬁlling a variety of ‘valueadding’ roles for the PFC. In fact, most VCFs spend more time providing these value-adding services to PFCs than they do evaluating new investment opportunities (Sahlman, 1990). Prior research has identiﬁed several major value-adding roles for the VCF. For instance, venture capitalists play a strategic role as sounding boards for and generators of strategic initiatives, an operational role as providers of key external contacts for locating managerial recruits, professional service providers, or key customers, a personal role as friends, mentors and conﬁdants, and a disciplinary role as directors who hold management responsible for meeting objectives and discharge management for nonperformance (Sapienza et al., 1994; Fried and Hisrich, 1995). In this chapter, we examine the determinants of the successful execution of these roles. Value added is the result of three things. First, the quality of the valueadding activities is crucial. For instance, is...
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