The purpose of this paper is to investigate the role of human capital in venture capital organizations. New trends in investor behaviour have emerged in recent years. There is evidence to suggest that venture capital (VC) firms involve themselves more actively in the companies in which they invest through influencing company strategy and through using their knowledge and contacts to introduce portfolio companies to networks of suppliers and customers, professionals and alternative sources of finance.
Using survey data, the paper empirically examines the VC firms' propensity to engage in terms of the factors that make some firms more active than the others.
Specifically, the paper finds and identifies those mechanisms that are used by VC firms to develop their engagement practice, including human capital and specialized deal flow. The paper also addresses the question of the effects of VC firm engagement on performance.
The paper makes a contribution in terms of the way human capital performs in venture capital organizations and how public policies can explicitly take into account the human dimension of the investment process.
