Overcoming the financial chasm of new business ventures - a conceptual model of venture capital ecosystems

Abstract

Venture
capital (VC) and startups are a natural duo. While startups create disruptive
and incremental innovations with their technical and creative expertise, many
lack the financial resources to grow their company. VC funds provide this
needed finance – in addition to business acumen – in exchange for an equity
share of their company, with the hope that this risky investment will produce a
significant return. Though the importance of adequate VC stimulation in the
startup community is well discussed and agreed upon by many studies, as a
theoretical concept, ecosystems of VC remain underdeveloped, making it
difficult to comprehend how a VC ecosystem works, and more importantly, how to
improve one. Nations hope to improve their VC activity and therefore their
global competitiveness, by consulting the current VC literature and other
comparative VC publications (scoreboards, case studies and regional
benchmarks), but these do not approach VC from an ecosystem perspective, which
might explain the discrepancy in their results and conclusions. The absence of
an ecosystem perspective in VC literature, results in a lack of a holistic
understanding of the mechanisms of a venture capital ecosystem (VCE).
Consequently, this shortage of comprehension might explain why current studies
do not provide the reasons for the shortcoming of the Dutch VCE. This is the
first study to take the ecosystem perspective of the entrepreneurial ecosystem
(EE) theory in the field of VC and seeks to answer the following main research
question: How can the
Dutch venture capital be improved through a conceptual model, which explains
the determinants influencing the development of a venture capital ecosystem?