Venture capital as a platform – leveraging the collective to accelerate growth
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School of Business |
Master's thesis
Authors
Date
2019
Department
Major/Subject
Mcode
Degree programme
Strategy
Language
en
Pages
100+2
Series
Abstract
Ever since the industry's establishment, venture capital (VC) firms have been recognized as essential nodes in financial and innovation networks, providing financing for high-risk entrepreneurs and startups. Now, due to the rising competition in the relatively young European VC market, VCs are forced to understand better the needs of startups and to refine their value propositions accordingly. A notable trend in this front during the past years has been an emergence of a VC as a platform approach, entailing an increasing focus on facilitating connections between portfolio companies. As the details of the benefits of this platform approach and growing connectivity within VC portfolios have so far stayed implicit for academia, this thesis concentrates on understanding this novel phenomenon. The emphasis is put especially on the interaction and knowledge sharing within VC firms’ portfolios and the opportunities for organizational learning that arise from this close collaboration. More specifically, the research problem addressed is: What is a VC platform and how should it be practiced to maximize the value for both the VC firm and its portfolio companies? This problem is divided into two sub-questions: 1) Why are VC firms pursuing a platform model? 2) How are VC firms practicing the platform model, especially in terms of portfolio cooperation? The study was conducted as an exploratory case study where the units of analysis were fifteen European VC firms based out of Berlin, Helsinki, London, Paris, and Stockholm. A systematic literature review forms a basis for the study, and primary data sources are interviews with venture capitalists and people in platform-specific support roles to unveil the VC firms’ side of the phenomenon. The main theoretical contribution of this thesis is the identification of portfolio cooperation as an emerging form of non-financial VC value add due to increased competition and VC firms’ need to refine their value-add in a scalable way. The results of the study propose that the benefits of knowledge sharing between portfolio companies are threefold from the companies’ perspective: their learning curves may shorten, they are more likely to avoid common mistakes, and they may receive important emotional support from other entrepreneurs. Whereas from the VC firm’s standpoint, the potential advantages include improved deal sourcing as well as increased returns of the fund. The practical implication of the research is an overview of factors to consider when determining whether to and how to pursue a VC as a platform model, including facilitation of knowledge sharing between portfolio companies.Description
Thesis advisor
Jääskeläinen, MikkoRitvala, Tiina
Keywords
venture capital, portfolio management, non-financial value add, portfolio synergies, organizational learning, knowledge sharing, knowledge transfer, high-growth startups