In their eyes: How entrepreneurs evaluate venture capital firms

Abstract

Although the literature on the venture capital industry is extensive, how entrepreneurs perceive their VC investors remains an under-researched topic. The dominant principal–agent model provides a crude picture based on rational assumptions. As such, we still lack accurate understanding of how exactly entrepreneurs view and why they evaluate their VC investors in certain ways. This study attempts to address this gap through a systematic content analysis on 4,653 online comments for 261 VC firms and statistical analyses on numerical ratings. Our results show that entrepreneurs are attentive to certain attitude and behaviors exhibited by VC firms such as late responses and ethical concerns. Statistical analyses also reveal that, surprisingly, VC firms with success records appear to have lower ratings and VC geographic density seems to boost ratings. The implications for practitioners and scholars are discussed. 'Abstract by Institutional Investor, Inc. Journals Group'