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The role of private venture capital investors in enhancing value-adding activities and innovation of high growth firms in Uganda

Author

Listed:
  • Ahmed I. Kato

    (University of South Africa, South Africa)

  • Germinah Evelyn Chiloane-Tsoka

    (University of South Africa, South Africa)

Abstract

For more than three decades, private venture capital (VC) firms have been recognised for their pivotal role in advancing value-creation and innovation in high-growth enterprises. Recent studies have found VC as a viable driver for the economic growth of developed nations. Research shows that many technological global companies today started as small venture capital (VC) funded companies. However, less evidence is available in emerging economies to support value creation and innovation capacity provided by the VC companies in Uganda. Consequently, how and when venture capitalists (VCs) can give significant oversight and add value to their ventures beyond VC funding has remained unresolved. Therefore, we use survey data from 77 VC firms expounded by interview data from key respondents from the VC industry. Our study finds that VCs’ role is essential for nurturing value-added skills in VC-financed firms. Evidence was predictable in improved financial management, sales turnover, profitability, strategic planning, innovation capacity, recruitment, sound BOD, and a broad network for future funding opportunities. Our study contributes to the under-studied space of VC performance, especially in Uganda, where there is limited academic literature in this field. These results may support entrepreneurs/governments to engage in lucrative partnerships with experienced VC firms that can bridge the SMEs’ equity financing gap early. Finally, this study offers a foundation for future research direction.

Suggested Citation

  • Ahmed I. Kato & Germinah Evelyn Chiloane-Tsoka, 2022. "The role of private venture capital investors in enhancing value-adding activities and innovation of high growth firms in Uganda," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 9(4), pages 193-211, June.
    • Handle: RePEc:ssi:jouesi:v:9:y:2022:i:4:p:193-211
    DOI: 10.9770/jesi.2022.9.4(10)
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    References listed on IDEAS

    as
    1. Cumming, Douglas & Fleming, Grant & Suchard, Jo-Ann, 2005. "Venture capitalist value-added activities, fundraising and drawdowns," Journal of Banking & Finance, Elsevier, vol. 29(2), pages 295-331, February.
    2. Divakaran, Shanthi & McGinnis, Patrick J. & Shariff, Masood, 2014. "Private equity and venture capital in smes in developing countries : the role for technical assistance," Policy Research Working Paper Series 6827, The World Bank.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    private venture capital firms; value-adding activities; venture capitalists; innovation; success of innovative firms; Uganda;
    All these keywords.

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis

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