Early stage venture capital investing: comparing California and Scandinavia

Abstract

While venture capital has become a global phenomenon, our knowledge about regional differences in venture capitalist (VC) behavior is quite poor. Most cross-regional comparisons have been quantitative replications of US based studies, which has made it difficult to discern qualitative differences. To help remedy this situation, we conducted semi-structured interviews with altogether 12 early stage VCs in California and Scandinavia. The results, which are presented in some detail, reveal substantial differences in VC activities and priorities during deal flow generation, investment, post-investment involvement, and exit. Taking a cue from these specific findings, we conclude by suggesting that VCs can be conceived of as fulfilling three ideal typical roles as investors, coaches and partners. Since they imply quite different modes of engaging with portfolio companies, it is also suggested that these roles – while based on a limited sample – may be useful for discriminating between VCs also in other settings.

Keywords:

• venture capital
• cross-regional comparison
• interviews
• California
• Scandinavia

Notes

1. Vicarious or pre-selection mechanisms are indirect proxies for real selection mechanisms. As such they provide faster selection processes that lead in approximately the same direction as the real mechanism (Campbell 1965). In the present context the VC is seen as a proxy for 'the market'.

2. There may be substantial variation also within the US. However, focus is on California since this is arguably the center of the US VC community.

3. http://www.heritage.org/index/ranking.