Does venture capitalist industry specialization increase the value of venture capitalist post - investment activity in portfolio firms? A study of business ventures perception of Norwegian venture capitalists

Ola B. Tjade

Student thesis: Master thesis

Abstract

The literature on venture capital and the finance of innovation is vast and much of it focuses on the existence and extent of non-financial value added to new ventures through active ownership. This thesis develops a framework to measure non-financial value-added based on various venture capitalist activities used in similar research on value added. Similar frameworks have often been used to investigate which activities add most value to ventures and also in determining differences between different venture capitalists like private and public sector venture capitalists. The framework developed in this thesis is founded in knowledge and network theory, which provides the insights necessary to investigate entrepreneurs perceptions of the value added from their venture capitalist and their network. The purpose of the investigation is to uncover if industry-specialized venture capitalists add more of value to their portfolio companies than generalist venture capitalists and provide implications for entrepreneurs and venture capitalists. The empirical data is mainly collected through a survey sent out to 123 venture firms, owned by Norwegian venture capital firms, which were categorized into groups of generalist and industry specialized venture capitalist owned ventures. The findings show that industry specialized owned ventures experience more value added mostly to core venture capitalist activities, such as help in replacing management and inputs on new business developments. The value adding effects of specialization are found less important in what may be considered more time demanding activities, where venture capitalists traditionally are not as involved. The findings also show that the additional value added from specialist venture capitalists is more rooted in their knowledge than the relevance of the network they bring with them to the venture.

EducationsMSc in Management of Innovation and Business Development, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2010
Number of pages80