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The principal goal of this monograph is to provide an overview of relevant aspects and research findings pertaining to the period after the venture capital firm (also known as venture capitalist or VC) has made the decision to invest in a particular portfolio company (or entrepreneur).Drawing principally upon refereed journal papers in entrepreneurship, finance, and management, our review is divided into six principal areas: (1) what venture capital firms do, (2) the impact of VCs on portfolio firms and other stakeholders, (3) the role of syndication, (4) the nature and timing of exit from VC investment, (5) the role of VCs in portfolio companies that undergo an initial public offering (IPO), and (6) the returns from investing in VC.The monograph concludes with a detailed outline of an agenda for further research.We provide a summary of the main papers in this literature in a set of tables in which we identify the authors, publication date, the journal, the main research question, the theoretical perspective, data, and the principal findings. What Do Venture Capital Investors Do?Early research focused on how VCs differentiate from traditional financial intermediaries by describing what VCs do beyond investing in portfolio companies (e.g., Tyebjee and Bruno, 1984;Macmillan et al., 1989;Rosenstein, 1988), defining their roles and extent of involvement.Early descriptive evidence showed that there is a lot of variation with respect to both what VCs do and the extent of their involvement (Gorman and Sahlman, 1989;Macmillan et al., 1989), without explaining differences.Subsequent research examined the conditions under which VCs become more involved in their portfolio companies, especially with respect to variations in the characteristics of the portfolio companies.For example, the impact of greater agency risk (Gupta and Sapienza, 1994; Sapienza et al., 1996), business risk, and task uncertainty (Gupta and Sapienza, 1994) on VCs' interactions with the CEOs of their portfolio companies was highlighted.More recently, research acknowledges that the extent and impact of VCs' monitoring and value-adding is not only driven by portfolio company characteristics, but also by the VCs' characteristics.Resource dependence theory and the resource endowments of both VCs and entrepreneurs, such as their human, social, or intellectual capital (e.g., Baum and Silverman, Monitoring, Information Asymmetries and Goal Incongruencies 379Table 2.1.
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