Coss, Da id L.; Dhillon, Gup ee ; Udeh, I eoma
A icle
S a egic planning objec i es o en u e capi alis
in es men s in eme ging in o ma ion echnologies: A
alue- ocused pe spec i e
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Sugges ed Ci a ion: Coss, Da id L.; Dhillon, Gup ee ; Udeh, I eoma (2015) : S a egic planning
objec i es o en u e capi alis in es men s in eme ging in o ma ion echnologies: A alue- ocused
pe spec i e, The Jou nal o En ep eneu ial Finance (JEF), ISSN 2373-1761, Peppe dine Uni e si y,
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The Jou nal o En ep eneu ial Finance
Volume 17
Issue 1 Sp ing 2015 A icle 2
3-2015
S a egic Planning Objec i es o Ven u e Capi alis
In es men s in Eme ging In o ma ion
Technologies: A alue- ocused pe spec i e
Da id L. Coss
Vi ginia S a e Uni e si y
Gup ee Dhillon
Vi ginia Commonweal h Uni e si y
I eoma Udeh
Vi ginia S a e Uni e si y
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Recommended Ci a ion
Coss, Da id L.; Dhillon, Gup ee ; and Udeh, I eoma (2015) "S a egic Planning Objec i es o Ven u e Capi alis In es men s in
Eme ging In o ma ion Technologies: A alue- ocused pe spec i e," The Jou nal o En ep eneu ial Finance: Vol. 17: Iss. 1, pp. 27-64.
A ailable a : h ps://digi alcommons.peppe dine.edu/je / ol17/iss1/2
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S a egic Planning Objec i es o Ven u e Capi alis
In es men s in Eme ging In o ma ion Technologies:
A Value- ocused Pe spec i e
Da id L. Coss
Vi ginia S a e Uni e si y
Gup ee Dhillon
Vi ginia Commonweal h Uni e si y
I eoma Udeh
Vi ginia S a e Uni e si y
ABSTRACT
Academic and p ac i ione li e a u e sugges s ha Ven u e Capi alis s o en ha e p oblems wi h aligning
in o ma ion echnology oppo uni ies wi h in es men objec i es. To a la ge ex en he alignmen p ocess
is no o mally documen ed and elies on in ui i e ins inc s. Hence i is impo an o de ine Ven u e
Capi alis objec i es o in es men s in eme ging in o ma ion echnologies. This pape uses he Value-
Focused Thinking app oach o iden i y, de ine and s uc u e alue d i en objec i es. Based on da a
collec ed om a numbe o Ven u e Capi alis in e iews we iden i ied 130 alues, which esul ed in 72
objec i es. These objec i es we e o ganized in o 22 clus e s, which we e bi u ca ed in o undamen al and
means ca ego ies. In a inal syn hesis we p esen a 7 undamen al and 15 means ca ego ical objec i es o
s a egically planning Ven u e Capi alis in es men s in eme ging in o ma ion echnologies.
Keywo ds: S a egic planning, Ven u e Capi alis s, eme ging in o ma ion echnologies, alue- ocused
hinking.
JEL Codes: G24, O32, M13
Coss, Gup ee & Dhillon • S a egic Objec i es o Ven u e Capi alis In es men s
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I. In oduc ion
The c ea ion o a en u e is ull o unce ain ies (Bu ke and Mille , 1999),
especially when i in ol es eme ging in o ma ion echnologies. En ep eneu s mus be
willing o assume pe sonal, social, and psychological isks (Lumpkin and Dess, 1996),
when conside ing new in es men oppo uni ies. A Ven u e Capi alis (VC) likes o
ensu e an en ep eneu is awa e o , and commi ed o, o e coming he isks ypical o
eme ging echnology ma ke s. The connec ion be ween eme ging echnologies and VCs
can o en be a e y s ong one. Minola and Gio gino (2008) no e “small and medium-
sized en e p ises – especially young and inno a i e ones – need an adequa e con ex and
e icien and e ec i e ools i hey a e o su i e and de elop” (pg. 335). The union
be ween an en ep eneu and a VC is o en sho -li ed unless he VC is con inced, based
on pe sonal alues held o e alua ing in es men s, ha he business will p o ide an
accep able e u n. Hence, i is impo an o cap u e he alues o VCs such ha hei
objec i es o in es ing in eme ging in o ma ion echnologies a e well in o med. We
posi hese alues a e oo ed in he pe sonal, inancial, and o ganiza ional belie s ha
exis wi hin each independen VC.
The emainde o his pape is o ganized as ollows. Fi s , we discuss he ele an
li e a u e on VC belie sys ems and hei abili y o iden i y and in es in eme gen
in o ma ion echnology oppo uni ies, which a e cong uen o hei beha io al, inancial
and o ganiza ional ounda ions. Second, we p esen ou me hodology, which is based on
Keeney’s (1999) alue- ocused hinking. This app oach ocuses on de ining and
s uc u ing indi idual alues in o undamen al objec i es as a means o guide he decision
making p ocess. Thi d, we discuss ou iden i ied means objec i es and undamen al
objec i es. These objec i es a e hen eassessed in ligh o he li e a u e o explo e and
cla i y he associa ions hey ha e wi h each o he . An illus a i e case is also p esen ed.
Fou h, we p esen ou p oposed heo e ical and p ac ical implica ions, and conclude.
II. Li e a u e Re iew
VCs adop a wide ange o c i e ia o iden i ying, e alua ing and selec ing
in es men oppo uni ies. The e a e pe iods o ime when he momen um o he ma ke
d i es inexpe ienced VCs o in es in he la es ad. A o he imes, e en knowledgeable
VCs ge in luenced by hei pee ne wo ks o in es agg essi ely (e.g. see Scha s ein and
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S ein, 1990; Gup a, 2000). Resea ch has shown ha an indi idual’s decision p ocesses
a e suscep ible o cogni i e biases, which lowe hei pe cep ion o isk (Yazdipou , 2008;
Palich and Bagby, 1995; Sha e and Sco , 1991; Simon e al., 2000). Cogni i e biases
a e hough and decision making p ocesses ha de i e e oneous in e ences o
assump ions, ypically based on p edisposed opinions (Buseni z and Lau, 1996). Ve y
o en, indi iduals make decisions based on biases, heu is ics o ake sho cu s in hei
decision making p ocess (Buseni z and Ba ney, 1997). I en u e capi alis s make
decisions using biased hinking, signi ican a oidable mis akes may occu . Thus, VCs
imp o e hei decision-making p ocesses by using mo e impa ial in o ma ion and
ca e ul analysis. In p ac ice, VCs adop a b oad ange o s a egies, bu academic esea ch
has e e ed o a a he na ow iew as discussed below.
An analysis o he VC li e a u e sugges s ou eme gen ca ego ies o esea ch.
These a e: emo ional- i (Zah a e al., 2006; McKnigh e al., 2002); beha io al- i
(Bassellie e al., 2001; Bassellie and Benbasa , 2004); o ganiza ional- i (G ube , 2007;
O e by e al., 2006; Galb ai h and Schendel, 1983); and inancial- i (Hsu, 2004;
Sapienza, 1992; Fie and Pa el, 2006; Cu ley, 1992). Emo ional- i ocuses on human
elemen s such as pe sonali ies, cha ac e is ics and ai s. Beha io al- i ela es o aspec s
o human na u e, beha io and cha ac e s such as commi men , compe ence, dedica ion,
and mo i a ion. O ganiza ional- i ocuses on alignmen o s uc u es, p ocesses and
esou ces wi hin an en i onmen , while inancial- i ela es o unding, bene i s, ewa ds
and isks.
A. Emo ional- i
Resea che s iden i ied a ious emo ional aspec s o human beha io ha
in luence VC in es men decisions. Pas e en s ha a e mo e i id and e oke emo ion
a e likely o a ec VC decision p ocesses (Zacha akis and Shephe d, 2001). Typically,
such aspec s deal wi h us among pa icipan s, indi idual pe cep ions o abili ies,
cha ac e is ics and ai s o key s akeholde s. Fo ins ance, Zah a e al. (2006) s udied
ela ional us in business c ea ion and no ed ela ional us can o e come some issues
ela ed o social complexi y, causal ambigui y, in o ma ion asymme y, and poli ical
ensions ha a ise du ing business c ea ion.
Simila ly, Talaulica , G undei, and We de (2005) ound us be ween op
managemen eam membe s a oids losses in comp ehensi eness and yields speedie
decisions, because o he pe cep ion o being su icien ly supplied wi h in o ma ion.
Coss, Gup ee & Dhillon • S a egic Objec i es o Ven u e Capi alis In es men s
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Since he disposi ion o us can in luence an indi idual's belie s and in en ions
(McKnigh e al., 2002; Ja enpaa e al., 1998), i is a guable ha us be ween a VC
and an en ep eneu may lead o as e in es men decisions by he VC, because o he
belie o possessing adequa e in o ma ion o make decisions. Sapienza and Ko sgaa d
(1996) whose esea ch emphasizes he impo ance o en ep eneu engende ing in es o
us suppo his asse ion. Fu he , Shephe d and Zacha akis (2001) sugges us can
be buil by: signaling commi men and consis ency; being ai and jus ; inding a good
i wi h a pa ne ; and equen and open communica ions.
B. Beha io al- i
The no ion o beha io al i is based on he belie ha indi iduals will inco po a e
a quali a i e assessmen o isk in o hei inancial in es men decision-making p ocess.
Nelson and Win e (1982) s a e ha an indi idual’s economic beha io is a unc ion o
pas decisions. Simila ly, Hamb ick and Mason (1984) a gue ha i is one’s expe ience
ha a ec s one’s decision-making. The e o e, he success and ailu es o p e ious
in es men decisions will in luence he in e p e a ion o in o ma ion ega ding new
in es men decisions. Indi iduals p e e he com o o amilia i y and he e o e, end o
ocus hei a en ion on aspec s o hei en i onmen whe e hey ha e p io knowledge
(Le in hal and Ma ch, 1993).
Since a en u e capi alis ’s p ima y goal is o make p o i able in es men
decisions, hey end o ocus on deals simila o hei pas successes as opposed o hose
in which hey ailed. This implies VCs will choose a pa icula in es men s a egy mainly
based on he pe cep ions o hose ypes o isks ha a e ela ed o hei p io knowledge
and compe encies. VCs will explo e he di e ences in indi idual abili ies and
compe encies equi ed o inno a ion and business managemen . Such compe encies
comp ise o o ganiza ion-speci ic knowledge, in e pe sonal and managemen knowledge
(Bassellie e al., 2001; Bassellie and Benbasa , 2004). The abili y o de ine good
compe ence o leade ship will help in building a compe en IT o ganiza ion (Bassellie
e al., 2001); especially since Ca swell and Guna a ne (2005) in hei s udy sugges he
leade ship ocus o en ep eneu is on in en ion a he han he de elopmen o he
business.
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C. O ganiza ional–Fi
O ganiza ional- i equi es awa eness o cu en s a egic op ions. Galb ai h and
Schendel (1983) a gued ha s a egy is a complex sys em o ne wo k o in e wined
ela ionships be ween a ious managemen decision a iables such as ma ke ing, p icing,
p oduc ion and esea ch. Simila ly, o he s a egy s udies such as segmen a ion and
di e en ia ion esea ch by Clemons and Webe (1994), and b anding s udy by K ake
(2005) add ess he impo ance o a s a egic i be ween he in e nal ope a ions and
ex e nal s akeholde s, which has implica ions o VC in es men oppo uni ies. Lea i
(1964) s udied he s uc u al and echnical aspec s o o ganiza ions, and sugges s
s uc u es, p ocesses and s a egies should be in pe ec alignmen o success ul change.
Fu he , Hende son and Venka a am (1993) b ough he impo ance o aligning
business and IT s a egies o he o e. They sugges ed a ocus on o ganiza ional and IT
in as uc u es is impo an o ensu ing alignmen and de e mining o ganiza ional i .
Wi h espec o he in e nal en i onmen , i is essen ial o unde s and he in e nal
ope a ions o an o ganiza ion, and how hese in e nal ope a ions in e ac wi h he
psychological componen s o indi iduals and he echnological in as uc u es, wi hin
he o ganiza ion (G i i h e al., 2003). Oppo uni ies o new echnology exis when
he e is a gap be ween o ganiza ional and IT in as uc u es. This asse ion is pa icula ly
ele an in e ms o VCs iden i ying eme ging echnologies o ill a gap in he
ma ke place. A key ac o o o ganiza ional i is engaging in change managemen o
ensu e en e p ise agili y (see Hooge o s , 2004). O e by e al. (2006) s udied he need
o i ms o possess “en e p ise agili y,” which hey desc ibed as he abili y o i ms o
sense changes in he en i onmen and o espond acco dingly. Simila ly, Cla k e al.
(1997) desc ibed en e p ise agili y as “change- eadiness.” These changes may ela e o
eme ging echnologies and “ma ke pionee ing” (Co in e al., 2000) o “a launch o a
nex gene a ion p oduc ” as s a ed by Naul and Vandenbosch (2000).
D. Financial- Fi
VCs in es men decisions a e a unc ion o he inancial- i be ween he eme ging
echnology idea and hei own pe sonal esou ces. The mo e unding a ailable o an
eme ging echnology, he mo e aluable he eme ging echnology is pe cei ed o be.
Acco ding o Hsu (2004), en ep eneu s in a bid o gain access o VCs o high calibe
Coss, Gup ee & Dhillon • S a egic Objec i es o Ven u e Capi alis In es men s
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a e willing o discoun hei s a -up. By o e ing discoun ed in es men s o VCs wi h
high epu a ion, hese VCs may be willing o con ince membe s o hei ne wo ks o
in es (Shane and Cable, 2002; Zhang e al., 2008)
The pe o mance o a en u e is o g ea impo ance o he en ep eneu , bu also
o VCs ha ha e esou ces in es ed he ein. The e is he desi e o know be o ehand how
much o a e u n can be ob ained om an in es men (Fie and Pa el, 2006; Cu ley,
1992; Coope and Ca le on, 1979). Sapienza (1992) ound he pe o mance o a en u e
is ela ed o VC in ol emen . This sugges s VC unding is impo an o he de elopmen
o a en u e, bu also, VC in ol emen impac s he success o a en u e. This is
signi ican since i has implica ions o he expec ed in es men e u n, isk (Ami , 1990;
I e sen e al., 2004) and exi s a egy o VCs (Cumming, 2008; Huyghebae and Van
de Guch , 2004). As iden i ied by Cu ley (1992), h ee ca dinal p inciples o en u e
capi al in es men a e: (1) he VC is willing o ake he hea y isks in ol ed in new
en u es, bu also expec s o be ewa ded acco dingly; (2) he VC would no mally in es
o a medium e m (no less han 3 no mo e han 7 yea s); and (3) he VC will wan o
exi he p ojec wi h cash a he end o he pe iod.
III. Theo y and Me hodology
Li e a u e sugges s VCs end o in e nalize hei decision p ocess based on belie s
beyond hese le els o emo ional, beha io al, o ganiza ional and inancial conside a ions
o assess whe e hey should in es o wha hei p io i ies should be. Such conside a ions
ha e been e med as " alues" ha people migh hold (Keeney, 1992). The no ion o
alues is no hing new, and he impo ance o alues is well ecognized (O likowski and
Gash, 1994; Tan and Hun e , 2002). Va ious e ms ha e been used o desc ibe alues
including cogni i e maps, schemas, men al models, and echnological ames. In he
con ex o VC esea ch, he impo ance o indi idual alues has been ecognized.
Howe e , esea ch has allen sho o a icula ing how hese alues in o m decision-
making. I is impo an o es ablish he link be ween alues and decision making, since
VCs essen ially wan o decide whe he hey should in es men in a ce ain en e p ise o
no . How VC alues collec i ely o m objec i es o VC in es men decisions is wha
his pape add esses. While his aspec is new in he VC in es men decision-making
domain, alues ha e been well a icula ed o de ine objec i es in many o he domains
(see Keeney, 1999; To kzadeh and Dhillon, 2002).
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33
This s udy ocuses on he examina ion o VCs’ in es men decisions in eme ging
in o ma ion echnologies, and how hey a e shaped by hei alue pe cep ion o he
indi iduals wi hin an o ganiza ion. App oaching he concep o VCs alues om his
iewpoin , i can be a gued ha hei in es men objec i es a e shaped by unde lying
social and o ganiza ional ac o s, which impac he consciousness o VCs decision-
making p ocesses. Tan and Hun e (2002) a gue ha sense-making begins wi h he
pe sonal pe spec i es ha indi iduals use o unde s and and in e p e e en s ha occu
a ound hem. In his pape , we a gue ha he pe sonal pe spec i es amed by a VC’s
alues ul ima ely de e mine whe he o no a VC in es s in an eme ging in o ma ion
echnology.
Ca on’s (1959) heo y o alue sugges s indi iduals a e concei ed o be a he
cen e o a o ex o mul iple decision op ions. One decision is p e e ed o e he o he
based on a ious sociological and psychological alues and belie s ha hey pe sonally
iden i y wi h, as being closely linked o hei own. Resea che s ha e a gued ha
unde s anding he assump ions, expec a ions, alues, and belie s o s akeholde s can lead
o mo e success ul ou comes (O likowski and Gash, 1994; Tan and Hun e , 2002).
Unde s anding he cogni i e p ocessing o hese assump ions, expec a ions, alues and
belie s is becoming inc easingly impo an o a numbe o a eas o managemen esea ch
including s a egic managemen (Walsh 1995). In his pape , we adop Keeney’s (1992;
1994) app oach o unde s anding an indi idual’s decision-making p ocess, which is
based on Ca on's heo y o alue. We examine indi iduals’ ac ions o in es in eme ging
echnology by unde s anding indi iduals’ alue and belie sys ems.
Value- ocused hinking does no limi indi iduals o na owly de ined ules.
Ins ead, i ocuses on he i ems people ca e abou , which by de ini ion does no cons ain
indi iduals o a limi ed se o ules. Since his concep ela es o pe cep ions, opinions,
and unobse able cha ac e is ics o indi iduals, he majo obs acle is iden i ying a
comp ehensi e lis o VC in es ing objec i es, which p e ail in eme ging echnology
en u es. Hence, he decision o s a he p ocess o iden i ying key VC alues om
sc a ch. Keeney (1999) sugges s alues can be iden i ied by asking ele an indi iduals
wi hin an o ganiza ion abou hei alues. While no consensus exis s as o he app op ia e
numbe o indi iduals o in e iew, we in e iewed wel e VCs om geog aphically
di e se backg ounds o gain a b oad pe spec i e o gene ally held VC in es men alues.
The in e iewees in his s udy all had a minimum o 10 yea s o ele an expe ience
in es ing in eme ging echnology en u es. Mul iple in e iews we e conduc ed. In o al,
Coss, Gup ee & Dhillon • S a egic Objec i es o Ven u e Capi alis In es men s
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40
and ibula ions o de eloping success ul business o ganiza ions. This unde s anding is
no es ic ed o en ep eneu s’ business acumen, bu also includes an unde s anding o
en ep eneu s’ pe sonal ai s, since he ela ionships ha a e o med be ween VCs and
en ep eneu s a e social in na u e. Ques ions ha VCs may wan answe ed include – is
he en ep eneu sui ed o building a en u e o a success ul one, o is he en ep eneu
sui ed o de eloping ideas and inno a ions? As one esponden commen ed, "i is no jus
he business aspec s ha we a e looking a . We wan o be ce ain ha he e is good
communica ion be ween an en ep eneu and us. I is impo an o us o know i we can call
upon hem o consul a ion."
Ca swell and Guna a ne (2005) ound many en ep eneu s’ cha ac e is ics and
abili ies we e sui ed o in en ing, a he han de eloping he business. VCs also wan o
know i he en ep eneu is new a en u e building, o i he en ep eneu has ma u e
expe ience (Tho pe e al., 2006). Hsu (2007) no ed “P io ounding expe ience
(especially inancially success ul expe ience) inc eases bo h he likelihood o VC unding
ia a di ec ie and en u e alua ion; and ha ounde s' abili y o ec ui execu i es ia
hei own social ne wo k (as opposed o he VC's ne wo k) is posi i ely associa ed wi h
en u e alua ion” (pg. 772).
Maximize unde s anding o ma ke ing s a egy
Embedded in his objec i e is a VC’s desi e o know i he en ep eneu has a
ma ke ing s a egy, and i he en ep eneu is able o add ess di e en segmen s o he
ma ke . The VC ends o a o en ep eneu en u es ha ha e he abili y o di e en ia e
ma ke segmen s o hei eme ging in o ma ion echnologies. One esponden said, "We
wan o ha e ela ionships wi h en ep eneu s who a e knowledgeable o he ma ke , bu may
no ha e he ac ual abili y o ma ke . O , hey may ha e a wonde ul p oduc ha i s he
need, bu don' know how o sell." This knowledge is equi ed o “de eloping lexible
p icing s a egies and ailo ed o e ings o indi idual cus ome s" (Clemens and Webe ,
1994). This objec i e is achie ed by unde s anding he ma ke bounda ies o he
eme ging echnology. The goal is o be awa e ha he new en u e eam can p o ide
se ices ha a e accu a ely a ge ed a he needs o speci ic cus ome segmen s, especially
in oday’s global ma ke wi h he e ogeneous cus ome s and cos s ha a y widely ac oss
cus ome s (Clemens and Webe , 1994).
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Maximize unde s anding o en ep eneu ’s compe ence
In building an eme ging in o ma ion echnology en u e, he e a e ew p e-
de ined asks, and a VC expec s he en ep eneu o ha e he echnical abili ies o
unde s and he echnology equi emen s, as well as he business acumen o success ully
build he business. En ep eneu s mus no only possess he skills o do bo h jobs, bu
also he compe ence o de elop and nu u e human capi al o acqui e he equi ed
indi idual skill se s, as well. A VC needs o e i y he en ep eneu 's abili y o de elop
and deli e speci ic s a egic goals. To do his, he VC needs o be able o de ine
compe ence equi emen s o leading eme ging echnology en u es. Addi ionally, he
VC needs o ha e a high le el o con idence in he en ep eneu 's expe ien ial knowledge
in he en u e domain.
The no ion o compe ence is well esea ched. Dhillon (2008) p esen
compe encies o ha nessing in o ma ion echnology, and sugges s how hese abili ies can
be used o ensu e success o an en e p ise. I has also been a gued ha compe ence gaps
eme ge, no jus because o he cogni i e ailu es o a ew op people in a company, bu
also because o a lack o embedded cus ome and ma ke ela ed compe encies (see
Hende son, 2006). In e es ingly, one o he esponden s o his esea ch made he exac
same obse a ion. The esponden s a ed, "E en hough he CEO was compe en in
de eloping a g ea p oduc , he lacked he abili y o sell his own p oduc , he e o e key
s akeholde s need o e alua e he people in ol ed in he en u e and hei abili y o unde s and
he ma ke and cus ome pe spec i es."
B. Mean Objec i es
Maximize he en ep eneu ’s eam cong uence
The s a -up eam plays a key ole in VCs' e alua ions o en u e p oposals. VCs
conside no only indi idual eam membe s’ cha ac e is ics, sho comings, and quali ies,
bu also he eam’s cha ac e is ics. VCs desi e assu ance ha he eam is cohe en ,
cohesi e, and sha e he same goals and passion o success. F anke e al. (2008) ound
“No ice VCs end o ocus on he quali ica ions o indi idual eam membe s, while
expe ienced VCs ocus mo e on eam cohesion.” One in e iewee no ed, "I ha e o en
come ac oss a ious en u e p ojec s ha e en hough hey ha e a good inno a i e p oduc
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hey a e unable o be success ul and u n a p o i . When I dig deep in o hese o ganiza ions I
will usually ind one o wo key s akeholde s, who a e no comple ely on boa d wi h some
aspec o he en u e o some pe sonal poin o wha no and hey become he oad block o
success. In hose cases I will only in es i I know o ce ain ha hose oad blocks a e ei he
emo ed o on boa d wi h he o e all eam goals."
Fu he , VCs desi e o know i he en u e leade s can allow hei en ep eneu ial
capabili ies o low eely among eam membe s, hus ansmi ing hei en ep eneu ial
spi i o he eam and, subsequen ly d i ing he collec i e en ep eneu ship in he i m
(So iano and Ma ínez, 2007). VCs also need o unde s and he compe encies o he
leade ship eam and e i y ha hey ha e he abili y o gain syne gis ic bene i s om he
en u e's eam. The highe he le el o success o he en u e managemen eam’s
p e ious p ojec s, he mo e likely he VC will be willing o in es in he en u e p ojec .
Maximize business con inui y o eme ging echnology en u es
As eme ging echnology en u es succeed and become dominan playe s in he
ma ke segmen , “ he e y ac o s ha c ea ed and de ended he s eng h o he dominan
playe s may ha e become weaknesses” (Clemons e al., 1996). As such, a new en u e
mus ha e con ingency plans and p ocesses o ensu e i does no become he ous ed
incumben . VCs like o e iew business plans wi h well-de ined cla i y o business
p ocesses be o e hey a e willing o commi hei pe sonal esou ces o he en u e. One
esponden commen ed, "The business plan needs o include a well hough ou business
model as well and include a con ingency plan ha is comple e and comp ehensi e." This
ensu es ce ain e enue goals o echnology miles ones a e me wi hin he o ecas ed ime
pe iod. VCs also equi e con ac ual igh s g an ing hem he abili y o ensu e con inued
alignmen o he en u e wi h hei in es men po olio objec i es.
Maximize con idence in eme ging echnology ma ke
In eme ging echnology ma ke s, he ace o launch he nex gene a ion p oduc
be o e compe i o s, o en d i es new en u es o de elop an al e na i e o cu en
gene a ion p oduc s, o “dis up i e echnology” (Ch is ensen, 1997). Dis up i e
echnologies a e p ime a ge s o VCs who in es in eme ging echnology en u es.
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Table 2: Means Objec i es o VC In es men Decisions
Means Objec i es
Maximize en ep eneu ’s eam
cong uence
Ensu e en u e’s abili y o wo k in
eams.
Ensu e en u e managemen eam’s
success eco d.
Unde s and compe encies o
leade ship eam.
Maximize unde s anding o en u e’s
echnological inno a ions
Unde s and impedimen s o
echnology inno a ions.
De ine unde s anding o sus ainable
echnological inno a ions.
Maximize unde s anding o pa h
dependency.
Maximize business con inui y o
eme ging echnology en u es
De ine cla i y o business p ocesses.
De ine cla i y o business model.
Ensu e con ingency planning is
comple e and comp ehensi e.
Ensu e con inued alignmen o
en u e wi h in es men po olio
objec i es.
Ensu e he eme ging echnology
en u e is well-designed
Maximize alidi y o en ep eneu ’s
eme ging echnology ideas.
Ensu e well- o med o ganiza ional
s uc u e o new en u e.
De elop unde s anding o
o ganiza ion’s cul u e o new
en u e.
De ine epo ing eedback
mechanisms o new en u e.
Maximize con idence in eme ging
echnology ma ke
Maximize unde s anding o nuances
o eme ging echnologies.
De elop unde s anding o al e na i e
echnological inno a ions.
De ine cla i y o en ep eneu ’s
echnological in es men objec i es.
Maximize en u e capi alis ’s
in es men e u n in eme ging
echnologies
Minimize inancial isk.
Maximize unde s anding o
oppo uni y cos s.
Ensu e en ep eneu ’s accoun abili y
o e u n o en u e capi alis ’s
in es men .
Maximize e u n on in es men .
Ensu e cla i y o b eak-e en poin in
eme ging echnology en u e.
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Maximize en ep eneu ial dedica ion
Ensu e en ep eneu ’s commi men
o he du a ion o he en u e.
Unde s and en ep eneu ’s
managemen eam’s le el o
commi men .
Ensu e en ep eneu ’s mo i a ion o
comple e he p ojec .
Maximize dedica ion o employees.
Maximize s akeholde in ol emen in
eme ging echnology en u e
Iden i y s akeholde s who a e
de imen al o en u e.
Iden i y easons s akeholde s a e
in es ing in his eme ging echnology.
Iden i y easons o displeased
s akeholde s.
Maximize bene i s ealiza ion om
eme ging echnologies
Maximize unde s anding o
al e na i e eme ging echnologies.
Ensu e alidi y o he eme ging
echnology.
Ensu e eme ging echnology p o ides
bene i s.
Maximize cla i y o en ep eneu ’s
decision-making
Maximize unde s anding o decision-
making p ocesses.
De elop unde s anding o pa e ns o
decisions made by en ep eneu ’s
managemen .
Maximize socialized ne wo k
in es men s
Maximize in es men s om socialized
ne wo k.
Ex end in es men o socialized
ne wo k.
Maximize oppo uni ies o u u e
ne wo king.
Minimize isks o eme ging
echnology
Iden i y de imen s o eme ging
echnology.
De elop unde s anding o ine ia
needed o launching eme ging
echnology en u e.
De elop deepe unde s anding o key
ope a ional issues.
Maximize unde s anding o en u e’s
ope a ional clima e
Maximize unde s anding o supply
chain.
Maximize unde s anding o
dis ibu ion channels.
Ensu e a well-de ined imeline o
en u e’s p og ess.
De ine unde s anding o weaknesses
and s eng hs in en u e’s ope a ions.
Maximize due diligence
Ensu e he eme ging echnology is
socially esponsible.
Ensu e eme ging echnology mee
egula o y and legal equi emen s.
Ensu e in ellec ual p ope y is
p o ec ed.
Ensu e eme ging echnology is
deli e able, doable, achie able and
wo kable.
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Ensu e access o inancial da a a any
ime.
De ine en u e capi alis ’s exi
s a egy
Ensu e en ep eneu has a well-
de ined exi s a egy.
Maximize oppo uni ies o con inued
in es men .
Addi ionally, VCs end o look o an eme ging echnology wi hin a “ma ke ha o e s
uncons ained oppo uni ies o apid g ow h” (Rea, 1989). Howe e , "ma ke s ha do
no exis canno be analyzed" (Dhillon e al., 2001). The dis up i e echnologies
li e a u e a gues ha o en, a ma ke is unable o abso b he p og ess ha a gi en
eme ging echnology may o e . Fo his eason, i is impo an o go beyond jus he
echnology o he cus ome s o unde s and a ious ace s o a echnology ma ke .
One esponden no ed, "We need o unde s and he nuances o eme ging
in o ma ion echnologies be o e en ep eneu s a e able o make in es men decisions abou
in es ing in he echnology." Addi ionally, an unde s anding o al e na i e echnological
inno a ions will help VCs in he e ing p ocess o de e mining whe he o in es o no .
In o de o make his assessmen , en ep eneu s need o communica e o VCs a clea ly
de ined ision o he en ep eneu ’s echnological in es men objec i es.
Maximize en ep eneu ial dedica ion
To ensu e an en ep eneu ’s managemen eam is commi ed o he success o
he new en u e, VCs need o be able o e ec i ely assess hei dedica ion and
commi men . Fo example, he capaci y o sus ained and in ense e o is pa icula ly
impo an o en u es ope a ing in es ablished ma ke s, whe e compe i ion is s ong and
he e a e ew possibili ies o p o ec he p oduc s h ough pa en s (Dubini, 1989).
Equally impo an is he dedica ion o he employees and hei mo i a ion o comple e
p ojec s necessa y o success. E ikson (2002) ound commi men ends o dec ease wi h
age, and hose who a e younge o en may be s ong on commi men . As such, an
en ep eneu ’s eam mus be p ope ly balanced o include younge eam membe s.
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One esponden no ed, “We mus be su e o he en ep eneu ’s commi men o
sus ain he du a ion o he en u e be o e hey a e willing o in es he money and ime in o
he p ojec ." This unde s anding o commi men is no exclusi e o he en ep eneu 's
le el o dedica ion, bu includes he en ep eneu ’s managemen eam’s le el o
commi men as well. Also, he VC needs o be able o iden i y how o ensu e dedica ion
o employees. This includes being con iden he en ep eneu ’s mo i a ion o comple e
he p ojec is highly signi ican .
Maximize bene i s ealiza ion om eme ging echnologies
VCs wish o ully unde s and he eme ging echnology in which hey in end o
in es and he po en ial al e na i e echnologies. They need o ensu e he e a e socio-
en i onmen al bene i s as well as inancial bene i s o he eme ging in o ma ion
echnology. Addi ionally, he eme ging echnology may need enabling go e nmen
egula ions in o de o he bene i s o be ealized (Fishe and Ha ind ana h, 2004). A
leas one o he esponden s belie ed, "in o de o be able o achie e maximum e u n on
bene i s ealiza ion he VCs need o ully unde s and he isks om al e na i e eme ging
echnologies." Fu he mo e, he VC needs o pe o m a e i ica ion and alida ion o he
eme ging echnology o ensu e ha he echnology is capable o p o iding he expec ed
bene i s.
Maximize socialized ne wo k in es men s
O en VCs p e e o ely on hei social ne wo ks o ind an eme ging echnology
i m in which o in es . Shane and Cable (2002) ound “social ies p o ide a mechanism
by which in es o s ob ain in o ma ion.” Sha ing in es men oppo uni ies wi hin
socialized ne wo ks gene a e u u e in es men oppo uni ies, allows VCs mo e la i ude
in choosing which oppo uni ies o in es in, which in es men op ions o o ego, and i
helps VCs o maximize oppo uni ies o u u e ne wo king.
Indi iduals p e e o sha e in o ma ion wi h pee s, as his helps in iden i ying
in es men s om socialized ne wo ks. Also, he e is ypically a g ea e le el o us
be ween indi iduals in he same social ci cles, which leads o lowe ansac ion cos o
VCs du ing he alida ion p ocess. The e o e, VCs a e mo e likely o in es men wi hin
hei own socialized ne wo k, which also leads o u u e oppo uni ies. One in e iewee
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claimed, "I e y a ely ha e o look ou side my own pee g oup o oppo uni ies because deals
a e always being b ough o me by my iends."
Maximize unde s anding o en u e’s ope a ional clima e
VCs seek o unde s and a new en u e’s supply chain and dis ibu ion channels,
since hey a ec en e p ise’s g ow h and success. Co in e al. (2000) ound ce ain
dis ibu ion channel decisions (e.g. ela i e con ol o e dis ibu ion channel membe s
and ela i e numbe o dis ibu ion channels employed) a e di e en ially ela ed o i m
g ow h. Addi ionally, unde s anding he weaknesses and s eng hs o an ope a ion makes
an in es men decision easie . Also, a en u e's business plan needs o ha e a well-de ined
imeline, so VCs can de e mine i he en u e's imeline ma ches hei own in es men
goals.
A clea unde s anding o he ope a ional aspec s canno be unde es ima ed.
While en u e capi al o exis ing echnologies and businesses ce ainly p esen s he
oppo uni y o engage in a ca e ul e iew, in si ua ions whe e an en ep eneu o a VC
is en e ing in o a o ally new ield, such e alua ion is di icul . In ega ds o his, one
esponden no ed, "We p oac i ely seek specialis s who ha e he abili y o help no only wi h
he echnology de elopmen and implemen a ion, bu also he ope a ional needs he e migh
be."
De ine Ven u e Capi alis ’s Exi S a egy
The VC’s exi s a egy is designed o p o ide an op imal e u n on in es men
and p o ide oppo uni ies o con inued in es men . I is necessa y o in es in eme ging
echnology en u es whose leade s ha e simila exi s a egies. To ensu e exi s a egies
a e aligned, VCs o en p e e o ha e e ec i e con ac ual con ol igh s (Cumming,
2008), and as a esul o exe cising hese igh s, he VCs inc ease he p obabili y o hei
p e e ed exi s a egy. This also allows VCs o conside u u e oppo uni ies o
con inued in es men and keep hei in es men pipeline illed wi h po en ial
oppo uni ies.
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Maximize unde s anding o en u e’s echnological inno a ions
VCs wish o unde s and he echnological inno a ions en ep eneu s ha e
de eloped be o e commi ing any in es men s in o a en u e. O pa icula in e es is
when an inno a i e echnology has he capabili y o becoming a “dis up i e echnology”
and can possibly displace an incumben echnology. In o de o assess he oppo uni ies
a ailable o new eme ging echnologies, an unde s anding o possible impedimen s o
he echnological inno a ions is equi ed be o e a VC can make a ai p edic ion o a
speci ic echnology's po en ial impac on he exis ing ma ke .
Addi ionally, o measu e his impac on he exis ing ma ke , VCs need o ha e a
well-de ined unde s anding o whe he he eme ging echnology is a dis up i e o
sus aining echnology inno a ion. An analysis o pa h dependency will allow he VC o
unde s and he c i ical chokeholds ha migh exis wi hin he new en u e's ope a ions,
and be able o decide i an en ep eneu is capable o con olling hese c i ical poin s
e ec i ely o ensu e success o he en u e. Du ing he in e iew one o he VCs e e ed
o a sal shake and said, "I am willing o in es in almos any p oduc e en his shake , i I
know he e is a ma ke o i . I howe e p e e o in es in a new echnology ha is lacking in
he cu en ma ke place and pa icula ly, a p oduc ha displaces an exis ing p oduc by
app oaching he business p oblem om a new and esh angle."
Ensu e he eme ging echnology en u e is well-designed
VCs should also unde s and a new en u e’s o ganiza ional s uc u e. Ha ing
speci ically de ined epo ing and eedback mechanisms in place, which a e aligned wi h
he p oposed o ganiza ion s uc u e, helps c ea e posi i e and inno a i e cul u es wi hin
an o ganiza ion, and allows o a success ul new en u e. A en u e’s go e nance o
cul u e may es ic a esponse o a h ea (Clemons e al., 1996). Unde s anding a
en u e’s s uc u e, go e nance, and cul u e allows VCs o alida e he en ep eneu ’s
eme ging echnology ideas. An in e iewee s a ed, "one o he i s hings ha I equi e o
my eam du ing ou e ing p ocess is ha hey need o ead e e y in e nal documen a ailable
o hem whe e he e is communica ion be ween in e nal s akeholde s, as well communica ion
o ou side s akeholde s, and c ea e a s o y line and communica e ha o me. F om his, I am
able o ully unde s and hei o ganiza ion cul u e and iden i y s eng hs and oppo uni ies
o imp o emen ."
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Maximize Ven u e Capi alis ’s in es men e u n in eme ging echnologies
Maximizing e u n on in es men (“ROI”) while minimizing isk is he goal o
en u e capi alism. E en so, a “VC expec s o ake he hea y isks in ol ed in new
en u es, bu also expec s o be ewa ded acco dingly” (Cu ley, 1992). To e alua e and
unde s and he oppo uni y cos s associa ed wi h a speci ic p ojec , he e is need o
compa e ROIs o di e en p ojec s and he isks associa ed wi h each p ojec .
Unde s anding he eme ging in o ma ion echnology en u e’s b eak-e en poin u he
cla i ies he e u n on in es men po en ial o he en u e.
Addi ionally, inc easing an en ep eneu 's accoun abili y o e u n o VC’s
in es men will posi i ely a ec he likelihood o he VC in es ing in he en u e. One
in e iewee men ioned, "depending on he ype o en u e p ojec , i.e. phase one new
echnology en u e, phase wo echnology en u e wi h an exis ing ope a ions o a phase h ee
wi h eo ganiza ion equi emen s, I am expec ing a di e en e u n, because each equi es a
di e en amoun o my ime in addi ion o my inancial inpu ."
Maximize s akeholde in ol emen in eme ging echnology en u e
In his objec i e is embedded he knowledge ha mul iple s akeholde s a e
a ec ed and in luenced by eme ging echnology in di e en ways. Mul iple
cons i uencies a e di e se s akeholde s (Voss e al., 2005). As such, VCs need o
unde s and how an en ep eneu ial eam manages dissimila s akeholde s, which
s akeholde s in luence he en ep eneu , he mos , and in wha ways. I is possible o
indi idual s akeholde s o ha e al e na i e in e es s, which could be de imen al o a
en u e. I is impo an o iden i y easons s akeholde s a e in es ing in an eme ging
echnology, in o de o ensu e he common in es men goals align wi h each o he .
Addi ionally, by iden i ying easons o displeased s akeholde s, issues could be esol ed
p io o VC’s esou ce in es men . Such ac i i ies encou age inc eased s akeholde
in ol emen h oughou he en u e. Du ing he e ing p ocess, one VC s a ed, "We
once iden i ied a s akeholde who pu a deposi down o he p oduc and was wai ing o 18
mon hs o deli e y o he echnology. This s akeholde was easily con e ed o a posi i e
spokespe son o us and e e ed se e al addi ional clien s."
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in es . I may be as simple as a e e al o some hing mo e sys ema ic such as
cons an ly moni o ing he ma ke o unde s and wha echnologies a e making
a ma k in he ma ke place. Some o us look speci ically a echnologies ha
unde -pe o m in a ma ke place. So, i all depends.”
This obse a ion is subs an ia ed a leas by wha Tyebjee and B uno (1984) e e
o as "Deal O igina ion." O he esea che s ha e also a gued ha he decision o in es
in a pa icula en u e – o e en o coope a e wi h he en ep eneu – is in ica ely linked
o indi idual alues (see Cable and Shane, 1997). O he esea ches who ha e es ablished
he impo ance o alue cong uence as a concep include, Byg a e and Timmons
(1991) and Cha man (1989). While indi iduals mani es hemsel es in di e en ways –
alignmen o VCs wi h en ep eneu s, goal cong uence, and deal o ien a ion – he e is a
clea link be ween alues and how indi iduals decide wha needs o be done. In his
pape , we ha e a icula ed his link be ween alues and wha people wish o do, as
objec i es. And o mula ion o alue d i en objec i es is conside ed a i s s ep in good
s a egic planning (Keeney, 1992; 1994; 1999).
Ou s udy sugges s ha he eme ging echnologies ha go beyond he ini ial
s ages o concep ualiza ion and p og ess o he la e s ages o de elopmen a e no jus
a ec ed by he p esence o absence o unding bu also, by he social s uc u es and
in e ac ions ha a e ob ainable wi hin he domain whe e he eme ging echnology was
concei ed. These social s uc u es include ac o s such as he laws and egula ions exis ing
wi hin a gi en coun y o egion, and he le el o collabo a ion and coope a ion exis ing
among he g oup o pe sons wo king on he eme ging echnology. The e ec o he
in luence o he social s uc u e on eme ging echnology u he becomes appa en when
he e a e es ic ions on allowable sou ces o unding o an eme ging echnology. This,
in no li le way, may limi some VCs ha may be willing o in es in an eme ging
echnology.
Ou esea ch has wo majo heo e ical implica ions. Fi s , we p esen
heo e ically and empi ically g ounded undamen al objec i es o VC in es men s in
eme ging in o ma ion echnologies. Such objec i es help in achie ing he o e all
objec i e o "maximize e icacy o VC in es men s in eme ging echnologies." As
p e iously no ed, he e a e nume ous o he pieces o esea ch ha p esen s s ages o VC
unding, and success ac o s o new in o ma ion echnology s a -ups. Howe e , in ou
ques o ind o he esea ch ha p esen s objec i es ha would aid decision making o
ensu ing e icacy o VC in es men s in eme ging echnologies, none could be ound.
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57
Second, we p esen means objec i es o achie ing he undamen al objec i es. Bo h se s
o objec i es a e alue d i en and hence, a e g ounded in wha VCs ac ually eel, a he
han a laund y lis o al e na i es hey could pu sue.
The impo ance o de ining undamen al objec i es canno be o e s a ed. Keeney
(1992) conside s undamen al objec i es o ha e wo basic p ope ies - essen ial and
con ollable. The essen ial na u e o he undamen al objec i es indica es, “consequences
in e ms o he undamen al easons o in e es in he decision si ua ion,” while he
con ollable aspec “add esses consequences ha a e in luenced only by he choice o
al e na i es in he decision con ex ” (pg. 82). Conside he undamen al objec i e
"Maximize unde s anding o en ep eneu 's compe ence." Clea ly, he undamen al
objec i e mus lie somewhe e be ween he decision con ex (VCs in es men in eme ging
echnologies) and he s a egic objec i e (maximize e icacy o VCs in es men ). Exac ly
whe e he undamen al objec i e esides is howe e , a unc ion o he essen ial and
con ollable elemen s. The need o ocus mo e on he essen ial elemen s pushes he
undamen al objec i e owa ds he s a egic objec i e. Fo ins ance, in ou decision
con ex , gi en he inhe en complexi ies, "maximize unde s anding o ma ke making
mechanisms" may be essen ial o he s a egic objec i e. The con ollable elemen na ows
he objec i e and pushes i owa ds he al e na i es. And hence, "maximize
unde s anding o ma ke making mechanisms" may be con ollable and hence, close o
he al e na i es. The balance be ween essen ial and con ollable is illus a ed in igu e 1
below.
Figu e 1. Balancing equi emen s o a undamen al objec i e
Coss, Gup ee & Dhillon • S a egic Objec i es o Ven u e Capi alis In es men s
8
58
The second con ibu ion o his esea ch is a sys ema ic p esen a ion o he means
objec i es. While in he li e a u e he e is a p edominance o a ange o al e na i es he e
migh be o achie e a undamen al objec i e, Keeney (1992) c i iques such an app oach
as limi ing, since he al e na i es a e es ic ed o an exis ing se . In ou s udy, we p esen
al e na i es ha a e alue d i en, ha is wishes indi iduals migh ha e in he con ex o
uncons ained hinking. Keeney a gues such al e na i es o be be e . The means
objec i es p o ide a dual bene i . While hey ce ainly help in de eloping insigh s in
iden i ying decision oppo uni ies and sys ema ically app aising al e na i es, hei
measu emen , i ha is he in en ion, helps in quan i ying i a ce ain means objec i e is
being achie ed o no . The de elopmen o a alue model and de ini ion o a ious
a ibu es a e impo an , bu beyond he scope o he cu en pape and hus, o e s an
oppo uni y o u he esea ch.
VII. Conclusion
In his pape , we de ined s a egic planning objec i es o VC in es men s in
eme ging in o ma ion echnologies. Ou objec i es a e p esen ed in wo se s:
undamen al and means. The undamen al objec i es p o ide insigh in o he easoning
p ocesses o VCs when making in es men decisions. These objec i es end o be aligned
wi h he beha io al, emo ional, o ganiza ional, and inancial alues and belie s held by
VCs. While his pape has de eloped insigh on en u e capi alis alues owa d in es ing
in eme ging in o ma ion echnologies, hese alues may o may no a y when conside ed
in o he in es men con ex such as in es ing in pha maceu ical o manu ac u ing
indus ies. Fu u e esea ch u ilizing ou app oach o iden i y en u e capi alis alues
owa ds in es men s in o he indus ies could lead o he de elopmen o a sys ema ic
app oach o en u e capi alis s o de elop s a egic planning objec i es o all hei
in es men s.
In a u u e esea ch s udy, we will examine he ela ionships ha exis be ween
selec mean objec i es and desi ed undamen al objec i es. Also, he e is an oppo uni y
o de elop measu emen scales o hese objec i es and analyze he s a is ical signi icance
among iden i ied ela ionships. Wi h he newly-gained knowledge on VC alues abou
in es ing in eme ging echnologies, we can examine success ul eme gen echnology
companies o de e mine i hese objec i es inc eased he likelihood o success o he
echnology i ms. Since eme ging in o ma ion echnologies a e highly in o ma ion-
asymme ic and a e ha d o alue, ha ing an unde s anding o which objec i es lead o
The Jou nal o En ep eneu ial Finance • Volume 17, No. 1 • Sp ing 2015
59
success, will allow in es o s o educe unce ain ies in hei decision-making p ocess and
inc ease hei p o i oppo uni ies.
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