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Coaching Small Biotech Companies into Success: The Value-adding Function of VC


  • Terttu Luukkonen,
  • Mari Maunula,


The paper reports an empirical study on the non-financial value-added provided by Venture Capital investors to their investee firms. This study will use a four-class grouping of the various non-financial value-adding capabilities provided by VC firms, namely, scouting, monitoring, signalling and value-adding services. The study examines biotechnology industry in Finland. Finland has a dual system with independent (partially ever-green) VC companies and public or semi-public VC organisations. Additionally, informal VCs are fairly active. Whether the different types of VC organisation aim, are able and indeed do deliver non-financial value-added, in addition to their financial input, is the central focus of this study. The paper has an evolutionary perspective on Venture Capital according to which VC promotes a variety of experimentation with new technologies, especially through the foundation of new firms oriented to experimentation and development of new ideas. At the same time, VC industry fulfils a selection function in its role as a financial intermediary. The study data have been collected through interviews, conducted at the end of 2005, with the total population of small and medium-sized, VC-backed biotech companies established in Finland since 1986. Central findings of the study include an observation that all three VC types did provide value-added in the meaning outlined above. Nevertheless, there were clear differences between them in terms of the overall perceived value-added as well as in their activity profiles. Informal investors were found to have the highest overall value-added and kept closest contacts with their investee firms.

Suggested Citation

  • Terttu Luukkonen, & Mari Maunula,, 2006. "Coaching Small Biotech Companies into Success: The Value-adding Function of VC," Discussion Papers 1032, The Research Institute of the Finnish Economy.
  • Handle: RePEc:rif:dpaper:1032

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    References listed on IDEAS

    1. Mitchell Berlin, 1998. "That thing venture capitalist do," Business Review, Federal Reserve Bank of Philadelphia, issue Jan, pages 15-26.
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    7. Baum, Joel A. C. & Silverman, Brian S., 2004. "Picking winners or building them? Alliance, intellectual, and human capital as selection criteria in venture financing and performance of biotechnology startups," Journal of Business Venturing, Elsevier, vol. 19(3), pages 411-436, May.
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    Cited by:

    1. Luukkonen, Terttu & Maunula, Mari, 2007. "Non-financial Value-added of Venture Capital: A Comparative Study of Different Venture Capital Investors," Discussion Papers 1067, The Research Institute of the Finnish Economy.

    More about this item


    venture capital; biotechnology;

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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