Corporate Venture Capitalists and Independent Venture Capitalists: What Do They Know, Who Do They Know and Should Entrepreneurs Care?

Venture Capital: An International Journal of Entrepreneurial Finance, Vol. 7, No. 1, pp. 3-21

Posted: 23 Aug 2008

See all articles by Markku V. J. Maula

Markku V. J. Maula

Aalto University, Department of Industrial Engineering and Management

Erkko Autio

HEC Lausanne

Gordon C. Murray

University of Exeter Business School

Date Written: January 2005

Abstract

There is an established body of research that has examined the value-added provided by venture capitalists for their portfolio companies. More recent work has started to look at the comparable activities of corporate venture capitalists. However, to date, the value-added provided by these two types of investors for their portfolio companies has not been compared systematically. This study undertakes such an evaluation by comparing the social capital-based and knowledge-based forms of value-added provided by independent and corporate venture capitalists to their portfolio firms. Primary data from US technology-based new firms that had received both corporate venture capital and independent venture capital funding is analysed. This study demonstrates that the value-adding contributions of corporate venture capital and independent venture capital investors are different both in their origins and in their consequences. Independent VCs add value in helping raise additional finance, recruiting key employees and professionalizing the organization -- early-stage establishment activities we term 'enterprise nurturing'. Corporate venture capitalists are superior in helping the young firm build commercial credibility and capacity, and in providing technological support -- growth-focused activities termed 'commerce building'. Importantly, the two forms of value-added appear complementary. It is concluded that it is in the interests of both portfolio companies and their investors that both sources of advice and support are available.

Keywords: Corporate venture capital, venture capital, value-added, social capital, knowledge-based view

JEL Classification: G24, M13

Suggested Citation

Maula, Markku V. J. and Autio, Erkko and Murray, Gordon C., Corporate Venture Capitalists and Independent Venture Capitalists: What Do They Know, Who Do They Know and Should Entrepreneurs Care? (January 2005). Venture Capital: An International Journal of Entrepreneurial Finance, Vol. 7, No. 1, pp. 3-21, Available at SSRN: https://ssrn.com/abstract=1246520

Markku V. J. Maula (Contact Author)

Aalto University, Department of Industrial Engineering and Management ( email )

PO Box 15500
FI-00076 AALTO
Espoo
Finland

HOME PAGE: http://users.aalto.fi/mmaula/

Erkko Autio

HEC Lausanne ( email )

Institut Stratège
BFSH1
Lausanne, 1015
Switzerland

Gordon C. Murray

University of Exeter Business School ( email )

Streatham Court
Rennes Drive
Exeter EX4 4PU
United Kingdom
+44 777 522 0857 (Phone)

HOME PAGE: http://business-school.exeter.ac.uk/staff/profile.php?id=34

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