Venture capitalists' non-financial value-added: an evaluation of the evidence and implications for research

Much research has suggested that venture capital (VC) investors can contribute post-investment to the success of new ventures in ways other than financing, but the specifics of such post-investment non-financial value-added (NFVA) are still not well understood. We systematically review, organize and evaluate the empirical research on VC NFVA, and compile together results that were previously scattered across many papers. In the 20 salient studies of VC NFVA published between 1986 and 2005, we observe little consensus regarding the definition and measurement of value-adding inputs and value-added outcomes, and little consensus regarding which of the VCs' value-adding inputs are most important. We further observe that NFVA studies have employed either qualitative methods or quantitative measures of retrospective perceptions. To guide future research, we propose a provisional model of VC exit success and a provisional eight-category typology of value-adding inputs that accommodates the findings in the literature. Two categories of the typology (legitimation and outreach) have an external orientation and six categories (recruiting, mandating, strategizing, mentoring, consulting and operating) have an internal orientation. The empirical evidence to date suggests that operating, outreach, consulting, mentoring and recruiting may be the most influential categories, but the evidence is far from definitive. We argue that future studies should examine ‘VC exit success’ as a high-impact dependent variable, and place greater emphasis on the measurement of directly observable events for both value-adding inputs and value-added outcomes.