The Money Connection—Understanding VC Networks (HBS Working Knowledge)
How
do venture capital firms spot the investment opportunities and also reduce
risk? It's the power of networks, says
Harvard Business School professor Toby Stuart—and understanding how they
work in VC is just now starting to be understood.
Key VC Networking Concepts
- Networks are important in all industries, but especially so in VC where investment opportunities can be located far away from the centers of venture capital.
- "Spanning ties" enable investors with fixed locations and industry expertise to learn of opportunities outside their geographic and industry domains, while also reducing risk.
- Ties are more likely to form between VC firms in the context of bandwagons, such as a "hot" IPO market, that create a rush of excitement around particular types of companies.
Related Insights:
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- International Financial Integration and Entrepreneurship
- What causes academics to become entrepreneurial?
- Successful Entrepreneurs Need Strong Social Networks
- Network Positions and Competitive Advantage
- Understanding The VC Network
