A venture capital model for transitioning economies: The case of Poland

Richard T. Bliss

Venture Capital, 1999, vol. 1, issue 3, 241-257

Abstract: The venture capital investment process is examined in a transitioning economy. The move from a planned economy to a free-market system confronts venture capitalists and entrepreneurs with an environment not typically encountered in developed countries. This may include high inflation, immature capital markets, a nascent legal system, and a dearth of managerial talent. Using interviews and follow-up questionnaires with a sample of Polish venture capital firms in 1995, the research yields two important results. The first is a VC decision-making model for transitioning economies that diverges from previous research in two areas. First, the privatization of state-owned enterprises is an important part of deal origination and many venture capitalists actively solicit deals from targeted industries. Second, firm-specific screens are rarely part of the process owing to the lack of depth in most industry and geographic segments. The second result is a modified set of investment criteria that reflect some of the unique difficulties venture capitalists face when evaluating deals in transitioning economies. Several differences between their criteria and those used by venture capitalists in developed countries are identified. The implications of these results for venture capital firms are discussed briefly.

Date: 1999
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DOI: 10.1080/136910699295884

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