Value added by venture capital firms

While most financial institutions are too risk averse to invest in new technology-based firms, venture capitalists are experts in this field. They are capable of investing in firms where returns are highly uncertain, but potential rewards are extraordinarily high as well. In addition to providing financial capital, venture capitalists assert to get actively involved in the new venture in order to offer valuable advice, information and networks with the intention of maximizing the upside potential of their portfolio companies. However, in reality considerable differences exist in the amount of value-added among venture capitalists. How do venture capitalists add value to their portfolio companies? What factors influence the level of value-added? Does the level of value-added meet the needs and the expectations of new venture teams in the USA and Germany? When selecting a venture capital firm or a portfolio company, it is crucial to understand which key factors to consider and how to manage the post-investment relationship effectively in order to realize maximal benefits. By developing a multi-theoretic model of the value-added and monitoring mechanisms and the factors influencing them, and testing it with extensive primary data from new venture teams of new technology-based firms in the USA and Germany, this book provides a deep insight into the complex entrepreneur-investor relationship and also offers concrete practical advice for investors and entrepreneurs.