Venture Capital Funding. 7.1 make available a further €15m to new or existing seed capital funds, in collaboration with Enterprise Irelands Seed and Venture Capital Programme, to further create and develop indigenous enterprise.
Venture Capital Funding. Venture capital investors are often regarded as pure financial intermediaries (Sapienza and Xxxxxxx 1989), who provide equity financing to entrepreneurial firms in order to realise extraordinary profits when exiting the business via initial public offering, trade sale, or secondary buyout. However, an increasing body of literature rejects this argument by referring to additional professional services which venture capitalists typically provide for entrepreneurial firms (Xxxxx 1988; Sapienza and Xxxxxxx 1989; Sapienza and Amason 1993). Management teams are often willing to accept a lower valuation of their business if they have the chance to get funding from a VC with a high reputation and a substantial track record (Hsu 2004). Thus, start-up companies expect superior guidance and coaching, and access to a larger and more valuable network. VC investors acquire substantial knowledge on how to support fast growing entrepreneurial firms. Due to their active involvement in their portfolio companies, venture capitalists are able to provide helpful advice (Xxxxxxx 1994; Xxx, Xxxxxxx, and Xxxxxxxxx 2000). They act as sounding boards or provide access to various networks and communities (Fried and Hisrich 1995). In addition, they support their portfolio companies through activities such as recruitment of senior executives, mentoring, strategic advice, or legitimisation in order to attract customers and strategic partners (Hellmann and Puri 2000). In particular, strategic activities are regarded as a major contribution by VCs to their portfolio companies (Fried, Xxxxxx, and Hisrich 1998). Some venture capital firms even provide intensive operating support. That is why investors are often described as “consultants with a financial interest” (Xxxxx and Xxxxxxx 1995, p. 102). A serial entrepreneur and CEO of a mobile software company comments on the relationship to VCs in the following quote. “The working relationship to the investors that we currently have is very productive. The investors are very constructive since they do not solely focus on control but contribute significantly to the development of the business. (…) They provide us with contacts on the customer as well as on the partner side. (…) If the development of the business deviates from the initial plan, less experienced investors, which do not know the markets tend to panic, seek to exchange people, and try to make a quick exit.” The value added by venture capitalists is especially effective if their co...
