New money, new problems: A qualitative study of the conflicts between venture capitalists and entrepreneurs in Sweden
Independent thesis Advanced level (degree of Master (Two Years)), 10 credits / 15 HE creditsStudent thesis
New ventures started by entrepreneurs need access to the right amount of financial resourcesin order to grow and expand businesses. Venture capital financing and partnerships withventure capital firms is a common route for entrepreneurial companies to acquire the neededfinancing for growing the venture, which in turn benefits a country’s economy as a whole.The partnership between the venture capital firm and the entrepreneur may involve conflicts,due to different goals and objectives towards the business, difference in management stylesand personal background as well as task and contextual conflicts, to mention some examples.We discovered a knowledge gap regarding conflicts between venture capital firms andentrepreneurs in Sweden and hence our aim with this study is to provide an answer on howventure capital firms and entrepreneurs are dealing with these potential conflicts in Sweden.To find out the answer, we reviewed selected and relevant literature on the subject andadapted a theoretical framework, based on existing literature. In terms of methodologicalapproach, we chose to be constructionists by following the abductive approach, in order toeffectively answer our research question and be able to add and complement our theoreticalframework, based on our empirical findings.Our empirical findings consists of four valuable interviews with venture capital firmmanagers and another four interviews with entrepreneurial CEOs and/or company founders,to get the view of both parties involved in venture capital partnerships. Based on ourempirical findings, our main conclusion is that the venture capital partnership often suffersfrom lacking communication from either or both parties, which could start or worsen theconflicts. Many of these problems are also derived by the vastly different backgrounds ofventure capital firm managers compared to entrepreneurs.Additionally, our study notes a tendency for less patience for conflicts among venture capitalfirms compared to entrepreneurs, as venture capital firms are willing to replace the currentCEO or make an early exit the venture or even liquidate its shares, if they deem problems assevere. On the other hand, entrepreneurs want to keep the dialogue going and seem to havemore patience. To mitigate the conflicts in the venture capital partnership, based on ourfindings, we propose that venture capital firms should hire managers or consultants with amore technical background when evaluating and working with certain entrepreneurs.Furthermore, venture capital firms may need to be more dynamic in terms of their controlmeasurements as opposed to being overly static on a long-term business plan which may getoutdated or lose relevancy.Entrepreneurs, nonetheless, need training and support in many cases, to understand how tocommunicate in business contexts and write business plans in order to facilitate thecollaboration with their venture capitalists.
Place, publisher, year, edition, pages
2011. , 91 p.
venture capital, venture capital firms, conflicts, financing, start-ups, new ventures, entrepreneurship, entrepreneurs, management styles, business growth, expansion, external equity, exit
IdentifiersURN: urn:nbn:se:umu:diva-45170OAI: oai:DiVA.org:umu-45170DiVA: diva2:426612
UppsokSocial and Behavioural Science, Law
Lions, Catherine, Assistant Professor
Nylén, Ulrica, Studierektor