The venture capitalist-entrepreneur relationship: Control, trust and confidence in co-operative behaviour

Abstract

This article acknowledges the importance of achieving confidence in partner co-operation within the venture capitalist (VC)-entrepreneur relationship. The entrepreneur and the VC need to balance the level of control and trust building mechanisms so that the optimal level of confidence in partner co-operation can be achieved. The study proposes that the entrepreneur can build trust with the VC (and vice versa) by signaling commitment and consistency, being fair and just, obtaining a good fit with one's partner, and with frequent and open communication. Open and frequent communication acts as a catalyst for the other trust building mechanisms. This theoretical framework acts as a counter weight to most previous studies on the VC-entrepreneur relationship that have emphasized control mechanisms in order to build partner co-operation without sufficient consideration of how this might effect trust and how trust and control jointly effect confidence in partner cooperation.