Effects of innovativeness and venture stage on venture capitalist-entrepreneur relations

Innovative new ventures constitute a disproportionately large source of economic growth, and the amount of venture capital flowing into such ventures is increasing. A key component in the success of venture-capital-backed firms is the relationship between the lead venture capitalist (VC) and the venture’s founding entrepreneur (E). The authors examined the impact of innovativeness and venture stage on VC-E relations in 51 venture-capital-backed firms and found: (1) greater marketing innovativeness in ventures associated with greater openness in VC-E pairs, (2) greater technological innovativeness in ventures associated with greater conflict in VC-E pairs, and (3) more frequent VC-E interaction in earlier stage ventures. They found that the relationship between technological innovativeness and openness of VC-E relations depended upon the venture’s stage.