Rising Strategies in the Venture Capital World: The Role of Gellify in the New Course of the Industry

Abstract

The Venture Capital industry has obtained an extraordinary growth in the last few years, spurred by powerful companies that repurposed the conventions that governed the environment since the 1960s and adapted them to the current macroeconomic and social situation. Nonetheless, the vast majority of players in the industry are still rooted into the belief that most of the investments, regardless of which fund does them, are destined to fail, while only a small percentage will provide the bulk of the profits for the entire Venture Capital firm. Recently, there have been examples of companies that are refusing this concept, and are trying to come up with new solutions in order to compete and get an advantage with respect to the rest of the market. The first objective of this paper is to try and evaluate the real variables that drive performance for a Venture Capital firm, in order to have a basis for a new type of strategy. Our findings show the impact that four of those variables have on the performance of a Venture Capital firm, and how they affect their investment strategies. Moreover, the effort of the authors has focused on how these new findings could lead to the creation of a new course in Venture Capital, with investment strategies that are centered towards more sensible investments, that compromise lower volatility with lower average returns. In order to verify our claims, we sought to convey the implications that this type of strategy, in combination with the integration of a Consulting division, has made on the case company Gellify, a Venture Capital firm based in Italy that is one of the few entities in the marketplace that have applied this innovative approach. We found three major reasons behind their brief but significant overperformance, and we evaluated their fitness and reliability in order to be used as a benchmark for the entirety of the industry. Our findings show that such a model could be beneficial only for a specific subset of Venture Capital firms, that satisfy certain conditions. Otherwise, there seems to be too strong contradictions and inefficiencies to adopt this model without taking into account any other external factors.