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Value-adding activities of venture capital companies: a content analysis of investor’s original documents in Germany

  • As many studies have shown, venture capital companies pursue value-adding activities for their portfolio firms to achieve abnormal returns compared to the market. Value-adding activities are complex and highly diverse, but also are very relevant to practice. Hence, the topic has been considerably analyzed in academic literature. However, there continues to be a lack of in-depth knowledge because of the sensitivity and scarcity of publicly available data from venture capital companies. We provide in-depth insights into the practices of venture capital companies. Using a longitudinal data-set obtained from nine venture capital companies in Germany, we qualitatively analyzed their value-adding activities. Drawing on iestors’ original documents, including business plans, iestment committee papers, reports and annual statements of the iestments, we created a typology of which value-adding services were performed. Results suggest that, consistent with prior studies, venture capital companies are highly engaged in supporting ventures with respect to financial and human capital issues as well as in establishing strong governance mechanisms to reduce information asymmetries between founders and iestors. Venture capital companies also make moderate use of their network of relevant contacts. Support for operational issues is low._x000D_ Keywords: Venture capital, non-financial value added, non-financial contributions, value creation, new venture

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Document Type:Article
Author:Dorian ProkschORCiD, Wiebke Stranz, Cornelia Ernst, Andreas PinkwartORCiD, Michael Schefczyk
Chairs and Professorships:Chair of Innovation Management and Entrepreneurship
Year of Completion:2017
In: Venture Capital, 19 (2017) 3, 129-146, DOI: 10.1080/13691066.2016.1242573