Entrepreneurial perspectives on informal venture capital

Alf SæTRE

Venture Capital, 2003, vol. 5, issue 1, 71-94

Abstract: Entrepreneurial firms, a major source of new employment in Europe, require risk capital from informal venture capitalists in order to create substantial economic growth. This study surveys the capital-acquisition process from the demand side--that is, from the entrepreneurs' perspective. Twenty semi-structured, qualitative, in-depth interviews, conducted over 2½ years and focusing on the entrepreneur-informal investor relationship, yielded four case studies that are analysed here. The analysis reveals two very different approaches to acquiring informal venture capital. One approach views capital as a scarce resource, the other views it as a commodity. Entrepreneurs who view it as a commodity contend that what makes the capital-acquisition process so difficult is not securing the capital itself, but rather finding investors with the requisite expertise and contacts. This paper proposes the term relevant capital to describe the 'added value' capital that these investors provide, and offers qualitative insights into the content of the informal investor/entrepreneur relationship.

Date: 2003
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DOI: 10.1080/1369106032000062731

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