Value added by venture capital firms

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While many financial institutions hesitate to invest in technology-based firms due to risk aversion, venture capitalists excel in this area, willing to invest in ventures with uncertain returns but high potential rewards. Beyond providing financial support, they actively engage with new ventures to offer valuable advice, information, and networks aimed at maximizing the upside potential of their portfolio companies. However, the value added by venture capitalists varies significantly. Key questions arise: How do they enhance value for their portfolio companies? What factors influence this value addition? Are the expectations of new venture teams in the USA and Germany met? Understanding the essential factors when selecting a venture capital firm or portfolio company and managing post-investment relationships is crucial for maximizing benefits. This work develops a multi-theoretic model to analyze value-added mechanisms and their influencing factors, tested with extensive primary data from new venture teams in the USA and Germany. It provides deep insights into the complex entrepreneur-investor relationship and offers practical advice for both investors and entrepreneurs.