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

  • David Y. Choi

    (Loyola Marymount University)

  • Martin Stack

    (Rockhurst University)

Registered author(s):

    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.

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    File URL: http://jefsite.org/RePEc/pep/journl/jef-2005-10-3-d-choi.pdf
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    Article provided by Pepperdine University, Graziadio School of Business and Management in its journal Journal of Entrepreneurial Finance and Business Ventures.

    Volume (Year): 10 (2005)
    Issue (Month): 3 (Fall)
    Pages: 75-88

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    Handle: RePEc:pep:journl:v:10:y:2005:i:3:p:75-88
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    1. David H. Hsu, 2004. "What Do Entrepreneurs Pay for Venture Capital Affiliation?," Journal of Finance, American Finance Association, vol. 59(4), pages 1805-1844, 08.
    2. AnnaLee Saxenian, 2002. "Silicon Valley’s New Immigrant High-Growth Entrepreneurs," Economic Development Quarterly, , vol. 16(1), pages 20-31, February.
    3. Rosenstein, Joseph, 1988. "The board and strategy: Venture capital and high technology," Journal of Business Venturing, Elsevier, vol. 3(2), pages 159-170.
    4. Birley, Sue, 1985. "The role of networks in the entrepreneurial process," Journal of Business Venturing, Elsevier, vol. 1(1), pages 107-117.
    5. 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.
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