Venture Capital

Classic scouting versus coaching debate

• Baum, J. A., & Silverman, B. S. (2004). Picking winners or building them? Alliance, intellectual, and human capital as selection criteria in venture financing and performance of biotechnology startups. Journal of business venturing, 19(3), 411-436.

This is one of the first studies to look at the debate over the "scout" versus "coach" role played by VCs. VCs affect selection both by acting as a “scout” able to identify future potential and as a “coach” who can help realize it. The findings suggest a joint logic that combines the roles: VCs finance startups that have strong technology but are at risk of failure in the short run and so in need of management expertise. It thus supports the belief in VC expertise, but only to a point. VCs also appear to make a common attribution error, overemphasizing startups' human capital when making their investment decisions.

• Colombo, M. G., & Grilli, L. (2010). On growth drivers of high-tech start-ups: Exploring the role of founders' human capital and venture capital. Journal of Business Venturing, 25(6), 610-626.

The findings support a coaching role played by VC (value-adding) for tech firms.