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A great deal of studies have been carried out so far to explore the impacts of private equity or venture capital (VC) investors on their portfolio companies. Most of them focus on corporate governance, management composition and skills, competences, and performance. A lesser amount of studies have been conducted on how VC investments interact with backed firms’ strategy process. In the present paper we aim to shed light on this topic by investigating in which stage of backed firms’ strategy process venture capitalists (VCs) invest in them and explaining this choice in the light of the value they can deliver and simultaneously extract from them in the different stages of that process. After a cross comparison of eight cases of Italian firms in which venture capital funds have acquired minority stakes, we found that these investors do not challenge the intended strategy backed firms had undertaken, but help them implement this strategy by enriching their endowments of non businessrelated resources and capabilities. Furthermore, VCs seem to invest when the gap between the intended strategy and implemented strategy of backed firms is at intermediate levels. While at early stages of backed firms’ strategy implementation VCs tend to evaluate the risk of their investment as too high, at later stages they would not deliver a significant “value added” to backed firms themselves.

Exploring the relationships between venture capital funds and venture-backed firms: A strategy process approach