Third Party Referrals in the Venture Capital Financing Process: Do Network Ties Matter?

Research output: Contribution to conferencePaperAcademic

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Abstract

In this paper we focus on the role of third party referrals in the venture capital funding process. Taking network theory as our theoretical perspective we explore if and how third parties play a role in the funding process. Hereby we focus on both the network ties between new venture teams and third parties and the network ties between VC’s and third parties. To do so we collected in depth information on 25 venture capital investment decisions and studied how third parties played a role in three investment stages being (1) deal flow, (2) the initial meeting and (3) during due diligence. Our data shows some interesting findings. (1) When a third party is involved in connecting the new venture to the VC fund, strong ties between both the venture team and the third party and between third party and VC seem to be favorable. (2) At the initial meeting between new venture and the VC, third parties don’t seem to play a role at all. And (3), during due diligence the role of third parties becomes important again as information source for VC’s, however the effectiveness of particular network ties seems to be dependent on the type of information provided by the third party.
Original languageEnglish
Pages1-23
Number of pages23
Publication statusPublished - 22 May 2008
Event16th Annual High Technology Small Firms Conference, HTSF 2008 - Enschede, Netherlands
Duration: 21 May 200823 May 2008
Conference number: 16

Conference

Conference16th Annual High Technology Small Firms Conference, HTSF 2008
Abbreviated titleHTSF
CountryNetherlands
CityEnschede
Period21/05/0823/05/08

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venture capital
funding
capital investment

Keywords

  • IR-73733
  • METIS-249656

Cite this

Heuven, J. M. J. (2008). Third Party Referrals in the Venture Capital Financing Process: Do Network Ties Matter?. 1-23. Paper presented at 16th Annual High Technology Small Firms Conference, HTSF 2008, Enschede, Netherlands.
Heuven, J.M.J. / Third Party Referrals in the Venture Capital Financing Process: Do Network Ties Matter?. Paper presented at 16th Annual High Technology Small Firms Conference, HTSF 2008, Enschede, Netherlands.23 p.
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abstract = "In this paper we focus on the role of third party referrals in the venture capital funding process. Taking network theory as our theoretical perspective we explore if and how third parties play a role in the funding process. Hereby we focus on both the network ties between new venture teams and third parties and the network ties between VC’s and third parties. To do so we collected in depth information on 25 venture capital investment decisions and studied how third parties played a role in three investment stages being (1) deal flow, (2) the initial meeting and (3) during due diligence. Our data shows some interesting findings. (1) When a third party is involved in connecting the new venture to the VC fund, strong ties between both the venture team and the third party and between third party and VC seem to be favorable. (2) At the initial meeting between new venture and the VC, third parties don’t seem to play a role at all. And (3), during due diligence the role of third parties becomes important again as information source for VC’s, however the effectiveness of particular network ties seems to be dependent on the type of information provided by the third party.",
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Heuven, JMJ 2008, 'Third Party Referrals in the Venture Capital Financing Process: Do Network Ties Matter?' Paper presented at 16th Annual High Technology Small Firms Conference, HTSF 2008, Enschede, Netherlands, 21/05/08 - 23/05/08, pp. 1-23.

Third Party Referrals in the Venture Capital Financing Process: Do Network Ties Matter? / Heuven, J.M.J.

2008. 1-23 Paper presented at 16th Annual High Technology Small Firms Conference, HTSF 2008, Enschede, Netherlands.

Research output: Contribution to conferencePaperAcademic

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AB - In this paper we focus on the role of third party referrals in the venture capital funding process. Taking network theory as our theoretical perspective we explore if and how third parties play a role in the funding process. Hereby we focus on both the network ties between new venture teams and third parties and the network ties between VC’s and third parties. To do so we collected in depth information on 25 venture capital investment decisions and studied how third parties played a role in three investment stages being (1) deal flow, (2) the initial meeting and (3) during due diligence. Our data shows some interesting findings. (1) When a third party is involved in connecting the new venture to the VC fund, strong ties between both the venture team and the third party and between third party and VC seem to be favorable. (2) At the initial meeting between new venture and the VC, third parties don’t seem to play a role at all. And (3), during due diligence the role of third parties becomes important again as information source for VC’s, however the effectiveness of particular network ties seems to be dependent on the type of information provided by the third party.

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Heuven JMJ. Third Party Referrals in the Venture Capital Financing Process: Do Network Ties Matter?. 2008. Paper presented at 16th Annual High Technology Small Firms Conference, HTSF 2008, Enschede, Netherlands.