How Venture Capitalists can use their Network in order to reduce the Information Asymmetries between themselves and the Venture Management Team
Business AngelVenture Capital FirmInformation AsymmetriesNetworkVenture Capital InvestmentsManagement of enterprisesFöretagsledningManagementBusiness and Economics
The purpose of this study is to increase the understanding of how venture capitalists can use their network in order to reduce information asymmetries between themselves and the venture management team. A qualitative approach with semi-structured interviews, consisting of open questions, have been used to receive gradate information in order to reach our explorative purpose. Our theoretical framework consists of relevant studies made on the dynamics of networks and the problems that can arise in the complex relationship between a principal and an agent. We have been interviewing two venture capital firms and therepresentatives from two business angel networks. We also made an additional interview with an influential financial actor in order to try to verify our conclusions Our conclusions are that an extensive network can be used by venture capitalists in order to; verify ventures? technologies, complement the competences in the venture management team, and arrange co-investments, resulting in reduced information asymmetries between themselves and the venture management team. By being structured the venture capitalist can develop an extensive network and thereby facilitate the implementation of these strategies.