Venture capitalist-induced relational fit and new venture performance: a Dutch biotech comparative case analysis

Abstract

Venture capitalists contribute financially as well as non-financially to new venture development. Their non-financial support consists of both direct strategic advice and indirect advice via networking. But the effectiveness of this advice is more dependent on its acceptance than on its nature. The acceptance of the advice of a venture capitalist by the entrepreneurs has been demonstrated to depend on the latter’s perception of fairness in their relationship with the venture capitalist. In this study, we demonstrate that more dimensions of relational fit than only the perception of fairness of entrepreneurs in their relationship with a venture capitalist play an important role in their relational fit, i.e. goal congruence and complementarity of competences and cognitions. Additionally, this study shows that venture capitalists can improve their relational fit to entrepreneurs and thereby the new venture development by taking some fit improving measures like bonding, avoiding forced decisions and a too large overlap of knowledge, adherence to shared norms of conduct and heterogeneity of the knowledge exchanged.