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Who Adds Value to Ventures? Understanding the Roles and Relative Contributions of Key Advisors in High-Technology Startups

Author

Listed:
  • David Y. Choi

    (Loyola Marymount University)

  • Martin Stack

    (Rockhurst University)

Abstract

During the process of starting and growing a company, entrepreneurs seek help from their key advisors, which include its directors, advisory board members, financiers, as well as others informally affiliated with the venture. This paper examines how the various groups add value to a venture and assesses the relative value of their contributions. Through a survey of high technology entrepreneurs, we find that directors, advisory board members and informal advisors add significant value by offering their expertise in various fields. Surprisingly, investors add relatively little value, even in such key areas as strategic planning and finance. While professional venture capitalists add more value than private investors, even the venture capitalists' contribution was perceived lower than those of the other advisors in key areas. Our results suggest that the contributions of investors may have been overestimated in conventional literature.

Suggested Citation

  • David Y. Choi & Martin Stack, 2005. "Who Adds Value to Ventures? Understanding the Roles and Relative Contributions of Key Advisors in High-Technology Startups," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 10(3), pages 75-88, Fall.
    • Handle: RePEc:pep:journl:v:10:y:2005:i:3:p:75-88
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    References listed on IDEAS

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    1. Birley, Sue, 1985. "The role of networks in the entrepreneurial process," Journal of Business Venturing, Elsevier, vol. 1(1), pages 107-117.
    2. David H. Hsu, 2004. "What Do Entrepreneurs Pay for Venture Capital Affiliation?," Journal of Finance, American Finance Association, vol. 59(4), pages 1805-1844, August.
    3. Macmillan, Ian C. & Kulow, David M. & Khoylian, Roubina, 1989. "Venture capitalists' involvement in their investments: Extent and performance," Journal of Business Venturing, Elsevier, vol. 4(1), pages 27-47, January.
    4. AnnaLee Saxenian, 2002. "Silicon Valley’s New Immigrant High-Growth Entrepreneurs," Economic Development Quarterly, , vol. 16(1), pages 20-31, February.
    5. Rosenstein, Joseph, 1988. "The board and strategy: Venture capital and high technology," Journal of Business Venturing, Elsevier, vol. 3(2), pages 159-170.
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    Cited by:

    1. Ervin L. Black & F. Greg Burton & Peter M. Johnson, 2009. "Qualitative Factors as Determinants of Continued Success:An Examination of eBusiness Entrepreneurial Firms Using the NewVenture Template," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 13(2), pages 76-102, Fall.
    2. Dirk Clercq & Steven A. Brieger & Christian Welzel, 2021. "Leveraging the macro-level environment to balance work and life: an analysis of female entrepreneurs’ job satisfaction," Small Business Economics, Springer, vol. 56(4), pages 1361-1384, April.

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    More about this item

    Keywords

    Value Creation; New Firms; Startup; High-Tech; Key Advisors;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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