Abstract
The aim of this article is to explore the decision-making policies by Polish Venture Capital (VC) firms, with special focus on the perception of entrepreneurs. This paper presents the results of a conjoint analysis and assessment of the importance of select characteristics among entrepreneurs and the qualities of a team of founders comprising managers of VC firms. The data were collected via face-to-face interviews with 26 Venture Capitalists. In the conjoint experiment, six attributes were presented, among which three represented characteristics of the entrepreneur (his/her passion and experience) and the management team (experience and completeness) alongside three characteristics of the opportunity (readiness of the product/service, growth rate of the market, and innovativeness of the whole project). VC managers ranked the importance of eight characteristics of the entrepreneurs related to their decisions and assessed the functional composition of the team of founders. The results of the experiment show that venture capitalists (VCs) most strongly appreciate the readiness of the product and entrepreneur’s passion. However, their preferences varied across the sample. The results of the ranking also show that the VC managers highly value the honesty of the entrepreneur. VCs typically prefer a team of founders, rather than a single-person project, preferably consisting of persons at least familiar with the technology and the market. This study contributes significantly to the state-of-the-art, as research on VC investment policy (investment criteria) is relatively rare in Central and Eastern Europe, where the VC industry is starting to flourish.
Highlights
This paper is dedicated to decision-making policy by Venture Capital (VC) firms in Poland.This topic addresses the interception of entrepreneurship and finance research and is part of a new, rapidly growing stream of studies, referred to as entrepreneurial finance (Denis 2004; Cumming and Johan 2017)
The first research questions were stated as follows: What is the relative importance of the investment criteria for Polish VCs? The two most important investment criteria found in the conjoint experiment were product readiness and passion of the entrepreneur (18.8%), with the first being more important
This emotional component might be perceived by VC decision-makers as a signal alleviating adverse selection concerns: passionate founders may signal the true value of their projects because they innately believe in their prospects
Summary
This paper is dedicated to decision-making policy by Venture Capital (VC) firms in Poland This topic addresses the interception of entrepreneurship and finance research and is part of a new, rapidly growing stream of studies, referred to as entrepreneurial finance (Denis 2004; Cumming and Johan 2017). To build their firms, entrepreneurs must provide the necessary resources, as well as funding. VC firms emerged in the USA as a modern type of intermediary that specializes in the provision of funding to entrepreneurial ventures (Gompers and Lerner 2006) This model of financing entrepreneurship has started to expand in Central and Eastern European Countries (CEEC), as well as in Poland. Studies on VC decision-making have been carried out in the USA since the 1970s (Wells 1974)
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