In the department of "this fits what I teach perfectly"/ (Confirmation bias?), a new paper shows again that venture capitalists bring more tot the table than just capital. Their expertise and relationships also matter.
"... a prior relationship with the founder, lead investor status, the size of a venture capital firm’s network of managers and outside board members, and geographic proximity between the venture capital firm and its portfolio companies are positively correlated with taking a board seat in an investment round. We also find that venture capitalists are far more likely to recruit managers or outside board members in portfolio companies on whose boards they serve. Furthermore, we find that these recruiting activities are only done by successful and well-connected venture capital firms on the board and not by their less successful and less connected counterparts. We control for potential endogeity by using the enactment of SOX as an instrument which exogenously increased the demand for sophisticated venture capital directors. This study provides evidence to support the notion that venture capital investors are active investors who take actions to enhance portfolio firm value."
'via Blog this'