What Do Venture Capitalists Do?
Harvard Business School
affiliation not provided to SSRN
University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship
Surveys venture capitalists in order to gain a better understanding of the work that they do and their relationships with their portfolio companies. Data were collected from 49 venture capitalists through a questionnaire in 1984. The average investment window for those surveyed was between five and seven years with a wide range amongst those as to the number of investments they pursue annually. On average, venture capitalists are personally responsible for managing nine investments per year. These venture capitalists sat on the board of five of these nine investments. The median response for time spent on portfolio management was 60%. Of this time, approximately 80 hours each year is spent on-site by those who are lead investors. Venture capitalists provide three important services in addition to money: building the investor group, reviewing and helping to formulate business strategy, and filling the management team. Many of the firms that venture capitalists support fail. Reasons cited by the venture capitalists for this failure include ineffective senior management, delays in product development, and problems with functional management. (SRD)
Keywords: Time management, Firm management, Venture capital portfolios, Venture capital firms, Venture capitalists
Date posted: November 17, 2009