Title: Monitoring and value-add by venture capital firms in investee firms: the case of foreign VCs operating in India
Authors: Kshitija Joshi; Deepak Chandrashekar; M.H. Bala Subrahmanya
Addresses: Global Data Office, Nomura International, 1 Angel Lane, London, EC4R 3AB, UK ' Faculty of Strategy, Indian Institute of Management Bangalore, Bannerghatta Road, Bengaluru – 560076, India ' Department of Management Studies, Indian Institute of Science, CV Raman Road, Bengaluru – 560012, India
Abstract: This paper makes an attempt to explain the differing intensities of involvement by VC firms in the investee companies funded by them. To start with, we quantify VC involvement intensity by developing an index and then divide the VC firms in our sample into three distinct clusters. Based on the profiles of these clusters, we conclude that both - the need for monitoring and that for value-addition play an equally important role in determining the intensity of monitoring. We find that Foreign VCs do not exhibit a uniform pattern with respect to their intensity of involvement. One set of foreign VCs avoid early-stage and high-tech sector focused investments altogether. They prefer niche later stage ventures which they can help scale up given their resources and networks. The second type of foreign VCs are those that tackle the agency risks associated with early-stage and high-tech venture investing head-on.
Keywords: foreign VC; agency risk; VC involvement; India; domestic VC; VC funding; information asymmetry; emerging economy.
International Journal of Entrepreneurial Venturing, 2022 Vol.14 No.2, pp.202 - 229
Accepted: 24 Jun 2021
Published online: 04 May 2022 *