Allocation of Attention within Venture Capital Firms

Posted: 24 Nov 2009

See all articles by Dean Shepherd

Dean Shepherd

University of Colorado at Boulder - Department of Management

Michael J. Armstrong

affiliation not provided to SSRN

Moren Levesque

University of Waterloo

Date Written: 2005

Abstract

The focus of this research is to determine theoptimal balance for all stakeholders between pre-investment activities andpost-investment activities of a venture capital firm, and in turn, how thisoptimal balance is different from what is desired by the various stakeholders(entrepreneurs, investors, managers, and employees). Pre-investment activities include all of those steps up to and including thesigning of the investment contract, and post-investment activities are thosesteps that occur after the signing.In order to complete the analysis, aqueuing network is utilized to model the venture capitalist process.Thismodel is then used to create a set of expressions to describe the financialperformance of the process. Results show that investors are willing to support a balanced allocation ofventure capitalist attention pre- and post-investment that is in the bestinterest of the process.Unlike the investors, the managers of venturecapital firms are usually opposed to such a balance.Further, the researchshows that the potential for disagreement among the parties regarding the bestway to operate the venture capital process is great, as each wants to maximizetheir profits despite the potential for harm to the other parties and theoverall process. (SRD)

Keywords: Experimental/primary research, Queuing networks, Allocation of attention, Financial models, Financial performance, Allocation decisions, Venture capital, Firm productivity, Management decisions, Motivation

Suggested Citation

Shepherd, Dean and Armstrong, Michael J. and Levesque, Moren, Allocation of Attention within Venture Capital Firms (2005). European Journal of Operational Research, Vol. 163, Issue 2, p. 545-564 2005. Available at SSRN: https://ssrn.com/abstract=1509218

Dean Shepherd (Contact Author)

University of Colorado at Boulder - Department of Management ( email )

Boulder, CO 80309-0419
United States
303-492-5962 (Fax)

Michael J. Armstrong

affiliation not provided to SSRN

Moren Levesque

University of Waterloo ( email )

Waterloo, Ontario N2L 3G1
Canada

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