Accept, deny or cultivate – how entrepreneurs evaluate and exploit potential value added by equity investors

Abstract

Venture capitalists and business angels can provide startups with many important resources. However, previous research has mainly focused on the value-adding side of investors while ignoring the value-exploiting side of entrepreneurs. This study examines how entrepreneurs evaluate and respond to investors’ non-financial support. We use a combination of inductive and deductive thematic analysis to analyze 19 semi-structured interviews with Vietnamese entrepreneurs. We find that entrepreneurs assess investors’ inputs based on the startup’s resource acquisition strategy, either in terms of how these inputs fit into the firm’s current resource gaps or in terms of how they lead to revisions in the firm’s strategy. Three factors can influence the resource-acquisition strategy: entrepreneurs’ resource preference, the firm’s stage of development, and its operating environment. We identify a psychological factor that shapes the post-evaluation response of entrepreneurs, i.e. their belief about the fixed/growth nature of investor abilities. In case investors’ inputs do not match or modify the current resource-acquisition strategy, founders who believe that investors’ abilities are fixed tend to adopt a rejection and avoidance response. In contrast, founders who view investor abilities as a malleable quality seek to improve investors’ understanding about their business and increase their motivation to help the company.