Strategic and Investment Behaviour in the German and Israeli Venture Capital Industries: A Comparison with the USA

Abstract

Analyzes the investment preferences of German andIsraeli venture capitalists (VCs) prior to the investment decision and examinestheir level of involvement in the strategies of their portfolio firms. It ishypothesized that larger VC firms are likely to spend less time than smallfirms do analyzing an investment. Other hypotheses suggest that the boards of VC-backed firms become moreinvolved in their portfolio firms' activities than traditional boards do andthat highly developed venture capital industries are very involved in theirfirms' strategies. These hypotheses, along with a few others, are evaluated inlight of data from interviews with managers of fourteen German and nine IsraeliVC firms with an investment focus on information technology. The data indicate that VCs focus on the entrepreneur's capabilities whenevaluating an investment proposal. Although most large firms devote relativelylittle time to analyzing investments, small firms in Germany show asurprisingly high efficiency in the investment process. Finally, later-stageinvestors are less likely than early-stage investors to become involved intheir portfolio firms' activities. (SAA)

Keywords: Portfolio firms, Venture capital, Venture capitalists, Early stage financing, Late stage financing, Investment criteria, Firm strategies, Firm size, Information utilization, Boards of directors, Firm governance