Life Cycles of New Venture Organizations: Different Factors Affecting Performance
Vol. Volume 6, Number 1 April/2001
David Flynn and Andrew M. Forman
The behavior of venture capitalists (VCs) and their affiliated new venture organizations (NVOs) is investigated in the context of the life cycle construct by assessing the differences that exist for firms that invest earlier versus later in the organizational life cycle. Previously it has been posited that in the post-investment relationship between the venture capitalist and the new venture or-ganization, the technical core is generally supplied by the NVO entrepreneur/scientist. These technocrats (versus managers), however, often ignore the administrative needs of the firm. There-fore, the venture capitalist often may fulfill the firm's administrative needs through information processing, recruitment, and other strategic decision methods. Furthermore, it is argued that the venture capitalists and NVO in tandem affect performance in different ways depending on the stage of investment by the VC. Data supplied by a random sample of 76 VCs support the con-tention that demographic, environmental, information processing, structural, and decision mak-ing variables affect performance differently depending on whether the VC invests in an early or later stage of an organization's life cycle.
venture capitalists, technical and administrative core, information processing, structure, decision making