Venture capital firms (VCs) play a unique role in fostering the transition to a sustainable society by financing and supporting technology ventures that contribute to long-term societal and environmental goals. However, the sustainability promise of technology ventures is typically not clear at the early stages of development, requiring critical evaluation and continuous monitoring. VCs thus require an approach for sustainability impact assessment to assess and monitor the sustainability impact of technology ventures and guide sustainable investment decisions – even more so in light of emerging regulatory requirements, such as the European Sustainable Finance Disclosure Regulation. Despite this need, limited research exists on sustainability impact assessment in the venture capital context. This study addresses this gap by investigating how VCs can assess the sustainability impact of technology ventures. Employing a design science research approach, we develop and evaluate a novel sustainability impact assessment framework tailored to the unique characteristics of VC investment. The framework adopts a Design Science (DS) approach, combining insights from a systematic literature review with findings from an in-depth qualitative study with VCs. Our contribution is twofold. First, we propose a set of design principles that enable VCs to conceptualize, assess, and monitor the sustainability impact and risks of their portfolio ventures. Second, we develop a framework for developing and validating design principles in highly contextual and emergent domains such as sustainable venture capital. The resulting design principles and framework integrate perspectives from entrepreneurial finance and technology entrepreneurship, aiming to inform both academic discourse and venture capital practice by positioning sustainability impact assessment as a central criterion in investment decision-making and venture support. • Develops and evaluates a novel sustainability impact assessment framework for venture capital firms. • Integrates theoretical insights and empirical evidence through a systematic design science approach. • Provides eight design principles to guide sustainability impact and risk assessment of early-stage technology ventures. • Demonstrates practical applicability through implementation and evaluation in a European VC fund and thereby addresses the growing need for sustainability impact assessment in venture capital under EU SFDR regulations. • Offers actionable guidelines for integrating sustainability into VC investment decision-making and monitoring processes.

This study contributes to the debate on the post-campaign effects of equity crowdfunding by investigating how prior engagement in equity crowdfunding influences the value added by subsequent venture capital investment, and how this relationship is shaped by the governance structure adopted during the crowdfunding campaign. Analysing 2514 ventures that secured venture capital funding in the United Kingdom, Germany, France, or Italy between 2015 and 2021, we find that ventures previously funded through equity crowdfunding exhibit lower post-investment growth than those backed solely by venture capital. However, this negative effect is significantly attenuated when the crowdfunding campaign was conducted through a nominee shareholder structure. This study emphasizes the importance of designing financing sequences according to specific business needs, as well as the importance of managing the investor base, mitigating coordination and governance costs. • Prior ECF reduces asset growth following VC funding. • Governance structures in ECF shape how effectively VCs add value. • With nominee shareholder structure, VC impact is preserved after ECF. • Results hold across multiple identification strategies.

The United States Leads the Globe in Venture Capital Funding for Orthopaedic Surgery

ABSTRACT We investigate the relation between IPO underpricing and the number of private capital rounds secured by unicorn firms related to other firms. We introduce a Bayesian arbitrage model, where the decision of going public is made by both the founder of the startup and the incumbent venture capitalists (VCs). Using a threshold regression model, we empirically analyse the association between underpricing and the number of financing rounds. Our findings highlight a positive relationship up to the fourth round for unicorns, whereas the relationship is negative for non-unicorn firms. Beyond this juncture, the relationship weakens for both types of firms, supporting the informative role of financing rounds in the IPO market. Consequently, our research indicates that the connection between IPO underpricing and the number of private financing rounds is non-monotonic and that being unicorn is not innocuous for underpricing.

In the dynamic realm of digital entrepreneurship, understanding how digital competencies shape entrepreneurial outcomes is vital, especially with the integration of artificial intelligence (AI). This study examines how digital competencies, as framed by the Theory of Planned Behavior (TPB) and Social Cognitive Theory (SCT), influence attitudes, subjective norms, digital entrepreneurial self-efficacy, intention, and behavior in the context of utilizing generative AI (BingGPT) for entrepreneurial activities. Utilizing structural equation modelling, data from 311 respondents in Portugal were analyzed. Findings reveal that digital entrepreneurial intention directly drives digital entrepreneurial behavior, with TPB Attitude and SCT Self-Efficacy as key influencers, the latter facilitating the transformation of intention into action. A novel discovery underscores that digital competencies significantly enhance digital entrepreneurial self-efficacy, boosting confidence in digital ventures. Subjective norms do not influence intention, indicating that AI adoption, such as BingGPT, is internally motivated. The study highlights the critical linkage between digital competencies and cognitive-behavioral factors in leveraging AI for entrepreneurship. It contributes to understanding how AI technologies impact attitudinal and cognitive aspects, fostering digital business ventures, and elucidates the sequential influence of digital competencies, TPB, and SCT on intention and behavior in the AI-BingGPT domain.

ABSTRACT As a pivotal driver of national economic development, corporate digital transformation also comprehensively strengthens firms’ core competitiveness. This study uses a sample of Chinese A-share listed firms from 2015 to 2022, constructs a high-dimensional fixed-effects model, and examines the influence of venture capital (VC) on corporate digital transformation. Regression analysis indicates that VC entry significantly promotes corporate digital transformation by reducing reliance on external financing, facilitating collaborative technological innovation, enhancing the provision of patient capital, and mitigating supply chain risks. Heterogeneity analysis indicates that VC exerts a stronger positive effect on corporate digital transformation in large-scale firms, firms located in regions with lower levels of financial supervision and digital economic development, firms operating in highly competitive industries, and firms whose top management teams have financial or research and development backgrounds. These findings offer implications for firms in addressing digital transformation challenges and facilitating corporate development, as well as for policymakers in formulating and adjusting policies to foster stable and healthy economic growth.

ABSTRACT Venture capital firms (VCFs) often refer investments to their network peers. Scholars argue that referrals alleviate idiosyncratic risks and reduce the cost of sorting investments. Yet, research on the strategic implications of referrals for VCFs is scant. This study investigates the impact of network referrals on the redistribution of VCF resources within a referred deal and across other ventures in a VCF portfolio. At the deal-referral level, we show that VCFs respond to the fall in idiosyncratic risks by increasing their financial exposure to the venture while monitoring less. Accordingly, deal referrals allow VCFs to save resources while taking an advantageous financial position in the referred venture. We show that while referrals enhance information about deals, referrals do not diminish VCFs involvement in formal governance nor directly affect the probability of follow-on investment. We also show that deal referrals motivate VCFs to redistribute resources within their portfolio.

Purpose This article examines critical events as components of serendipitous processes and the role of effectuation in shaping these processes and their unanticipated outcomes. Specifically, it introduces a conceptual model of effectuation-enabled serendipity and investigates why and how individuals capitalise on unexpected entrepreneurial opportunities and pursue unforeseen business ventures. Design/methodology/approach The data comprises three narrative accounts by immigrant entrepreneurs in Finland. Narrative research enables exploration of how individuals organise experiences to make sense of past events and their own actions. The study combines critical event analysis with a close examination of serendipitous processes and effectual thinking and action. Findings Critical events constitute a part of broader serendipitous processes, with effectuation providing a framework for decision-making and guiding navigation through each step towards unexpected outcomes. Without the interconnectedness among critical events, serendipity and effectuation, these unforeseen ventures would likely not have been initiated. Originality/value This study offers a pioneering empirical examination of the interplay between serendipity and effectuation in relation to critical events in new venture creation.

ABSTRACT This paper investigates the role of Venture Capital (VC) in the likelihood of delisting via mergers and acquisitions (M&A) for European companies listed in the 2004–2014 period, till 2020. Takeovers of listed companies are generally associated with underperformance, suggesting a need for a change in corporate control. In contrast, we show that VC-backed listed companies are more likely to be acquired when they exhibit higher growth rates compared to their peers. Moreover, this effect is driven by companies backed by low-reputation VCs. These VCs are known to rush their portfolio ventures to IPO and to have a limited post-IPO involvement. These conditions, combined with strong growth, may attract acquirers who perceive a need for change in corporate control. Conversely, we find no evidence of an increased likelihood of delisting by M&A in companies backed by highly reputed VCs, which tend to remain independent.

Science-based startups, which develop technologies at the frontier of scientific knowledge, play a crucial role in innovation ecosystems. However, despite their potential for groundbreaking innovation, these startups may face frictions in securing venture capital (VC) funding. This paper investigates whether science-based startups systematically take longer to secure VC funding compared to startups that are less rooted in science. We develop a formal model that highlights a misalignment between scientists, who often prioritize technological advancement, and VCs, who seek market validation. This misalignment is particularly relevant in early funding rounds, where startups have stronger outside options. Drawing on PitchBook data for startups founded between 1990 and 2015, we find that science-based startups often struggle to attract timely investment, which may limit their ability to scale and commercialize new technologies. This is reflected in a negative correlation between longer times to VC funding and subsequent startup performance. • Science-based startups face delays in securing VC funding, which negatively correlates with startup performance. • Scientists prioritize academic recognition, potentially creating an agency problem when seeking VC investment. • Misalignment between researchers and investors is particularly relevant in early funding rounds. • An inverted U-shaped relationship exists between a startup’s scientific orientation and its likelihood of securing early VC funding.

Introduction. Under contemporary conditions, venture investment can no longer be reduced merely to an external source of finance; it increasingly shapes the logic of financial decision-making, growth trajectories, business model choice, and the structure through which innovative enterprises combine various development instruments. The relevance of this study is further reinforced by the tendency, in 2024-2025, for the venture capital sector to demonstrate not only a recovery in activity but also stronger investor selectivity, greater capital concentration, and more demanding requirements regarding scalability, technological uniqueness, and market validation of projects. Purpose. The purpose of the paper is to determine how venture investment influences the formation of the financial strategy of innovative enterprises and to substantiate the expediency of shifting from a narrow reliance on traditional venture financing toward adaptive and combined financing models. Materials and Methods. The methodological framework of the study is based on abstract-logical, comparative, structural-logical, and systemic approaches, as well as on the methods of analysis, synthesis, and content analysis of academic sources. The empirical basis consists of secondary analytical data reflecting the dynamics and structural changes in venture financing in 2024-2025 at the global, European, and Ukrainian levels, including indicators of investment volumes, number of deals, sectoral concentration of capital, and the growing role of the segments associated with artificial intelligence, defense technologies, and security. Results. The findings indicate that, in 2024-2025, the venture capital sector demonstrated not only a recovery in activity but also higher capital concentration, stronger sectoral selectivity, and more stringent requirements regarding scalability, technological distinctiveness, and commercial validation. It is substantiated that venture capital is increasingly directed toward financing innovative companies operating in strategically important segments, primarily those related to artificial intelligence, automation, defense technologies, security, and resilience. At the same time, the study shows that for many innovative enterprises, especially in volatile and institutionally constrained environments, the most realistic financial strategy is not a narrow reliance on traditional venture financing, but rather a combined model integrating venture capital with grants, public support, strategic partnerships, and other hybrid instruments. The scientific novelty of the results lies in developing an integrated approach to understanding venture capital as a factor shaping the entire financial strategy of innovative enterprises, rather than merely providing financing for individual growth stages. The practical significance of the results lies in their applicability to the strategic planning of financing models for innovative enterprises, as well as to the development of entrepreneurship support measures and innovation policy instruments. Prospects. The prospects for further research include developing a typology of financial strategies for innovative enterprises based on their stage of development, industry specialization, and the configuration of blended financing. The practical significance of the obtained results also lies in their possible application to the strategic planning of financing models for startups and fintech companies, as well as to the improvement of entrepreneurship support instruments and innovation policy measures.

Abstract Analyzing approximately 2,000 applicants to a U.K. seed fund, this study examines how venture capital (VC) due diligence affects startup outcomes independent of funding decisions. Leveraging random reviewer assignment, we find that due diligence increases 2-year growth but lowers continuation rates among nonfunded applicants, reflecting a dynamic of accelerated scaling or exit. Evidence points to a learning mechanism: due diligence exposes founders to advanced website technologies, prompting capability building in digital skills. Firms selected for due diligence adopt these technologies, even before raising external capital. The findings highlight VC due diligence as a formative process influencing startups beyond the funded few.

Purpose This study aims to investigate the determinants of innovation performance in technology-based firms (TBFs) located in regions with low research and development (R&D) intensity, using Colombia as an empirical case. It examines how internal capabilities and external ecosystem variables, such as venture capital (VC), contact networks, research capacity, policy support, technological infrastructure and human talent, shape two types of innovation outcomes: business process innovation and product innovation. Design/methodology/approach A quantitative, cross-sectional and correlational-explanatory design was used. Data were collected through a structured questionnaire from 63 TBFs supported by national innovation programs. Structural equation modeling (SEM) using SmartPLS was used to test the hypothesized model and assess direct relationships between the determinants and the two innovation dimensions. Findings The results indicate that technological infrastructure and research capacity are the strongest predictors of innovation outcomes. VC shows a positive effect on business process innovation but does not influence product innovation. Contact networks and human talent do not exhibit direct effects; however, human talent is closely associated with the formation of networks, suggesting that its contribution operates conditionally through relational and organizational mechanisms rather than as an independent input. Policy support does not directly affect innovation but exerts an indirect influence by enhancing access to VC and infrastructure. Research limitations/implications The study is limited by its cross-sectional design and focus on a single national program, which may constrain generalizability. Future studies should adopt longitudinal and comparative approaches to capture contextual heterogeneity and incorporate moderating and mediating variables to provide a more nuanced understanding of innovation dynamics. Practical implications The findings provide guidance for policymakers and managers in resource-constrained regions. Strengthening technological infrastructure and research capacity emerges as essential to sustain both process and product innovation. Tailored financial instruments, such as venture or seed capital, should prioritize efficiency improvements while enabling firms to advance toward market-oriented outputs. Policies can indirectly enhance innovation by facilitating access to capital and infrastructure rather than by acting as direct drivers. For managers, aligning human talent with collaborative networks is critical to leverage conditional contributions. Together, these strategies can foster more resilient and competitive TBFs. Social implications The findings suggest that public policies fostering collaborative networks, strengthening research capacity and improving access to financing and infrastructure can play a pivotal role in supporting innovation, particularly in under-resourced regions. Originality/value This study contributes to the understanding of how internal capabilities and external enablers interact to shape innovation performance in emerging economies. By distinguishing between business process innovation and product innovation and applying SEM in a low-R&D context, it provides both theoretical insights and practical guidance for strengthening entrepreneurial ecosystems.

ABSTRACT Studies of the Venture Capital (VC) screening process traditionally assume that VC criteria are independent of other criteria. However, these criteria may interact and influence each other in cause‐and‐effect relationships. Therefore, there is a need to understand the interdependence of VC screening criteria. In this study, a decision support framework is proposed for VC screening criteria, based on the Decision‐Making Trial and Evaluation Laboratory (DEMATEL) method and Intuitionistic Fuzzy Set (IFS) theory (IFS‐DEMATEL). Building on prior work on VC investors, we identify a holistic list of 20 evaluation criteria in seven categories (founding team, product or service, financial, market, environmental, social, and governance characteristics). The IFS‐DEMATEL method is used to identify the relative importance attached by VC investors to different criteria, pinpoint the most significant criteria, and explicate the cause‐and‐effect relationships between criteria. Finally, the proposed framework is used to empirically examine VC screening criteria based on a case study involving VC experts/investors from the UK and the US. We find that environmental protection, the team and working environment, and profitability are the most influential criteria; that is, they have the greatest impact on the other criteria. This study both enhances the VC screening literature and makes an important practical contribution by proposing and illustrating a decision support framework capable of addressing VC screening decisions in complex and imprecise real‐world scenarios.

Many real-world screening tasks in venture capital must rank large start-up candidate pools under conditions of tight review capacity, time-varying information, and rare investment success outcomes. When datasets are constructed retrospectively, post-decision updates can leak into features and inflate performance, especially with random splits. This study proposes a leakage-aware, time-based evaluation framework for capacity-constrained screening formulated as a top-K ranking problem. Using a dataset of 117,141 early-stage firms as an empirical testbed, features were constructed strictly as of a reference time t0, a 180-day temporal embargo was enforced around the train–test boundary, and generalization was assessed with time-ordered splits. Because venture capital decisions are made on a shortlist, evaluation emphasizes ranking quality using PR-AUC, Lift@K, Precision@K/Recall@K, and NDCG@K, reported with bootstrap confidence intervals. Under this leakage-aware protocol and with strong class imbalance, maturity-related signals achieve the strongest PR-AUC (0.0144), while team and combined signals yield the best top-50 shortlist concentration. Finally, probability calibration substantially improves reliability for threshold planning (Brier score reduced from 0.0972 to 0.0161 with sigmoid calibration) while leaving ranking essentially unchanged. Overall, the study provides a leakage-aware evaluation template and an interpretable baseline for time-dependent venture capital screening tasks involving start-up selection, investment success prediction, leakage risk, and limited review capacity.

Multiple workforce trends are reshaping the healthcare landscape including the growing influence of corporate ownership of healthcare systems and physician practices, including private equity (PE) and venture capital (VC) investments, and a rise of physician unionization. Explore experiences and perceptions regarding these trends. An exploratory embedded mixed methods design with a 15-question survey and semi-structured virtual focus groups held on May 14, 2024 and July 17, 2024 using rapid qualitative methods. Thirty-three individuals from 26 different organizations participated, with 28 participants completing the embedded survey. Most were physicians (93%) and leaders (36%) primarily from nonprofit or academic organizations. Participants (18%) stated that members in their hospitalist group were actively considering unionization. There were four themes: (1) the business of healthcare is perceived to create misalignment between clinicians and health systems, with corporatization, particularly PE, seen as adding to these challenges, (2) healthcare workers increasingly feel voiceless in a margin-focused environment, contributing to unionization efforts, (3) unionization was seen as an advocacy tool with benefits and drawbacks including conflicts with professional values, and (4) participants, primarily physicians, felt poorly informed about unionization and had a wide range of views on the topic. PE/VC was viewed as predominantly negative though varied by context. In this exploratory study, participants perceived corporatization, including PE investment, as influencing clinician interest in unionization. While causal relationships cannot be inferred, findings suggest that unionization may be used as a mechanism for clinicians to regain voice with participants also noting potential uncertainties and drawbacks.

Venture Capital Value Creation and Competitive Advantage: Evidence from Indian Digital Startups

Receiving venture capital can dramatically shape the trajectory and ultimate success of startup firms. Because these investments occur under significant uncertainty, investors rely heavily on subjective assessments, often backing entrepreneurs who are similar to themselves. Yet, research on this tendency has largely relied on coarse demographic categories, potentially obscuring more granular visually assessed forms of similarity that influence investment decisions. This paper introduces “face distance,” a novel measure of visual similarity derived from facial recognition models, to explore this subtle channel. Using a mixed-methods approach that combines observational data from a top startup accelerator with an online controlled experiment, I find that facial similarity between an entrepreneur and an investor is a powerful predictor of investment. This relationship is more pronounced when there is relatively higher uncertainty, suggesting that facial similarity is a heuristic investors tend to rely on when concrete “hard” information is scarce. In addition, investments between visually similar entrepreneurs and investors underperform in terms of successful exits, which is consistent with a costly distortion. These findings highlight that homophily operates at a highly granular, visual level in early-stage investment and that this is not only inequitable but also a potentially inefficient heuristic. Funding: The author gratefully acknowledges funding from the UCLA Behavioral Lab. Supplemental Material: The online appendix is available at https://doi.org/10.1287/stsc.2025.0490 .

Entrepreneurship has emerged as a critical avenue for economic revitalization.Recognizing the transformative potential of entrepreneurship, South Africanuniversities have begun to integrate entrepreneurial education into their curricula.Despite its potential to drive economic transformation, entrepreneurial education inSouth Africa struggles to realize its full impact, leaving many graduates ill-equipped totransition from academic training to practical business ventures. Therefore, this studyevaluated the effectiveness of entrepreneurial education programs in South Africanuniversities, identifying gaps between theoretical instruction and practical application,and proposed actionable strategies for enhancing curricula, resource allocation, andmentorship initiatives to foster entrepreneurial skills and reduce youth unemployment.This was achieved by using a desktop research method, collecting secondary data frompublished literature sourced on online databases using keywords relevant to this study.It was found that South African entrepreneurial education programs are limited byoutdated methods, inadequate funding, and weak industry alignment, resulting insubpar outcomes compared to global benchmarks. Additionally, South Africanprograms prioritize theory over practical skills, lacking experiential learning andinterdisciplinary approaches needed for real-world entrepreneurship. Furthermore,enhancing entrepreneurial education requires experiential curricula, improvedinfrastructure, faculty training, and accessible mentorship programs to align withmarket needs. It was recommended that universities should embed experientiallearning to align entrepreneurial programs with industry needs. Additionally,universities should shift to hands-on methods like start-up simulations andinternships. Lastly, institutions should expand funding, mentorship, and industrycollaborations to reduce youth unemployment.

ABSTRACT This paper investigates whether the European Investment Fund (EIF)’s equity interventions act as a catalyst or a substitute for private financing in the European equity market, shaping the crowding-in or crowding-out dynamics of private capital flows to SMEs and mid-caps. Using a unique regional-level dataset covering the 2010–2020 period, we estimate the mobilization effect of EIF investments separately for the venture capital (VC) and private equity (PE) segments. Our econometric results indicate that regions where the EIF has invested are associated with statistically and economically significant increases in private capital inflows over the following three years. The relationship is particularly strong in the PE market, consistent with a crowding-in of private investors, whereas for VC we observe more heterogeneous patterns and no evidence of crowding-out. In both cases, socio-economic characteristics are significantly correlated with these developments. Overall, our findings highlight the EIF’s capacity to leverage public resources to attract private equity financing, offering new insights into how public financial institutions can complement market mechanisms in developing Europe’s risk-capital ecosystem.