Value-adding and Monitoring Activities of Venture Capital:A Synthesis Literature Review

Abstract

This article provides a synthesis overview of the corporate governance literature related to the venture capital (VC) investors (or venture capitalists: VCs) bring to their portfolio companies, especially from the investment structuring to the exit date. The relationship between VC investors and investee firms has been studied mainly from the perspective of Agency Theory, through control mechanisms and incentives adopted by VC investors. However, this paper draws attention to the nature of non-financial value-added and analyzes the importance of cognitive and relational dimension of governance between the different types of VC investors. The studies reviewed in this article focus on two primary areas of inquiry: (i) active involvement of venture capitalists, (ii) venture capitalists monitoring. While much has been learned in each area, this review highlights several areas in which our understanding of the issues remains incomplete.

Keywords: Venture Capital. Private Equity. Value-added and monitoring. Governance.