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PhD Dissertation: Abstract

This research investigates "The Importance of the Entrepreneurial Chief Financial Officer in New Venture Investing". The Abstract described the context for and purpose of the research, the research design / methodology, findings, and implications for both research and (more importantly) practice.

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VC Investing

VC Investing

1V1

Final

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Entrepreneurship

Importance of Venture Capital to Growth-Oriented Entrepreneurial Ventures ('GOEVs')

The importance of 'entrepreneurship' to the growth of national economies is widely accepted, but not particularly well-understood. This article explains why & how venture capitalists ('VCs') focus on growth-oriented entrepreneurial ventures ('GOEVs') which offer the potential of extraordinary returns, but with concomitant uncertainties & risks. Thus, venture investing is a specialized process where VCs are adept at bringing entrepreneurs and investors together, experienced at making investment screening / selection & structuring decisions, and actively engage in providing key advisory services that enhance investee survival and success - adding value at the micro or enterprise level. Pressing the repeat button over approximately 70 years to the point where global VC investing has breached $300B annually, and it is easy to understand how, at a macro level, by concentrating on fulfilling certain needs of chosen GOEVs (not micro enterprises), VC investment contributes significantly to the growth of many Western and Asian economies.

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VC Investing

VC Investing

1V2

Final

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Entrepreneurship

Investment Decision-Making: General Principles & Differences in Venture Investing

While there are general principles and concepts applicable to all investments, this article identifies & describes 10 unique attributes & challenges related to investing in growth-oriented entrepreneurial ventures ('GOEVs'). Some researchers have claimed that venture capitalists are experts in addressing these issues. Based on evidence of their investment performance as well as research by myself and others regarding their management assessment capabilities, this assertion may be questionable. Nevertheless, VCs do have an appetite for this alternative class of investments and appear to possess some specialized knowledge to assist them in addressing concomitant challenges and making related investment decisions. My PhD dissertation provides recommendations for VCs to enhance their assessments and judgments in this area.

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VC Investing

VC Investing

1V3

Final

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Investing Principles

Enterprise Performance: Relevant Metrics for Growth-Oriented Entrepreneurial Ventures ('GOEVs')

This article possibly represents one of the most significant contributions derived from thinking underlying my PhD research. It has both practical and theoretical implications. Practical implications should serve the management teams of growth-oriented entrepreneurial ventures (‘GOEVs’) – to keep them focused on achieving performance measures most likely to sustain engaging financial capital providers such as venture capitalists. Therefore, the practical recommendations will be especially important to those teams’ financial managers (such as eCFOs (see article #4C7)) who will be accountable for setting realistic financial goals, reporting on performance in relevant dimensions, interpreting that performance meaningfully - in an MD&A-style respected by VCs, and enabling other team members to make relevant contributions to value creation. Theoretical implications derive from my critical review of extant literature in both entrepreneurship and venture investing research using my financial management lens perspective (which incorporates both practical and research experience (see APPENDIX to article #5R9). This review revealed confusion (possibly inaccurate assumptions) and inconsistencies among researchers regarding what constitutes valued enterprise performance in a GOEV context and how performance factors relate to investment outcomes, or don’t. My recommendations should provide guidance and clarity for future research.

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VC Investing

VC Investing

1V4

Draft

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Entrepreneurship

Information Asymmetry, Uncertainty, and Risk in Venture Investing

Reported rates of return in venture investing are famously (infamously?) sensational. But such fables can be misleading as they don’t reveal the complete picture of venture investing outcomes. Venture investing is risky business and a significant proportion of venture investment outcomes involve lacklustre returns and even total losses . There is an apparent disconnect here. Returns are inextricably connected with challenging characteristics of the venture investing environment (see article #1V3.2022) – three of which are the subject of this article.

Over the last four decades, a significant volume of scholarly research explored VCs’ investment decision criteria, including the financial aspects of target & expected returns and, to a lesser extent, perceived risks. Investors’ returns are a common independent variable in studies examining the effectiveness of VCs’ investment decision criteria. My dissertation lists & reviews the most significant extant research to 2022 and revealed a preoccupation with VCs’ fabled returns, a bias for evaluating successful investment outcomes, and a relatively low research volume dealing with risk, uncertainty, and information asymmetry . Yet, these three concepts are interconnected and each presents challenges to realizing investment returns in this specialized asset class. This article describes and differentiates them.

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VC Investing

VC Investing

1V5

Final

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Entrepreneurship

How VCs Think & Act: Influences of Intuition, Bounded Rationality, Cognition, and Biases

This article summarizes insights from extant literature about how venture capitalists think and act in the course of making their investment decisions. It is relevant to my PhD research for two reasons – comparing my own observations from interviewing 16 Canadian VC investment managers with those of other researchers (e.g. for consistency, divergence, or novelty) and to provide context for practical recommendations from my research for VC investment managers (primarily in Canada). Therefore, I review perspectives in the debate over VCs’ espoused ('theoretical') decision factors vs. in-use practices and summarize what extant research has suggested about VCs’ thinking and behavioural influences such as their intuition, bounded rationality, cognition & learning, and biases.

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VC Investing

VC Investing

1V6

Final

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Psychology

Comprehensive Model of VCs' Investing Process

Based on an extensive review of four decades of scholarly literature on venture investing, combined with personal demand-side experience as an eCFO of several ventures, this model analyzes the Venture Capital Investing Process into 6 stages comprising 9 separately identifiable activities that involve 26 decision factors evaluated using 88 criteria. This model explicitly clarifies the distinction between VCs' screening and in-depth evaluative stages, which is perceived as inconsistent in prior literature. In addition, it identifies 36 criteria used by VCs in certain circumstances which can be fulfilled, supported, or improved by a professionally-qualified financial manager embedded in the investee enterprise. (This article should be read in conjunction with the companion article “VCs’ Investment Decision Factors & Criteria” - #1V8.2022).

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VC Investing

VC Investing

1V7

Final

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Model

VCs Investment Decision Factors & Criteria

This article summarizes my PhD dissertation’s (article #1V1) investigation and critique of the scholarly literature about the factors & criteria venture capitalists’ use (or say they use) when making decisions to invest in growth-oriented entrepreneurial ventures (‘GOEVs’). It should be read in conjunction with the companion article “A Comprehensive Model of Venture Capitalists’ Investing Process” (article #1V7). The most important feature of this article is its description and evaluative factors for each of the three Primary Investment Decision Constructs used by VCs: Management Capabilities, the Technology/Product/Market Opportunity, and Financial Factors. The relative importance of each to a specific investment decision depends on each VCs' investment preferences and whether it is screening the proposal or evaluating it in depth. Secondary Investment Decision Constructs (Alliances, Strategic-Competitive) are briefly discussed also.

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VC Investing

VC Investing

1V8

Final

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Primary Decision Constructs

VCs' Insights about Enterprise Management

Management assessments involve considerable subjectivity and the process and resulting judgments are susceptible to noticeable variations based on personal experience and expertise with such assessments. The problem is that most VCs collectively are not particularly good at making these assessments. One research study found VCs failed to achieve an accurate human capital assessment in 57% of their deals. Yet, considering VCs’ declared importance of management in their investment decision-making, understanding how VCs make such assessments and how they might be improved is a valuable endeavour for all stakeholders in VC investing. This article describes management assessment methods VCs use, how they tend to focus exclusively on the entrepreneur-leader rather than considering other team members, what attributes they look for in entrepreneur-leaders, and then discusses evaluative factors for management teams based on extant literature and the findings of my research.

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VC Investing

VC Investing

1V9

Final

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Management Teams

Impact of VCs' Own Attributes on their Investment Decision-Making

This article summarizes extant literature about the impact of select attributes of VC firms and their investment managers on investment decision-making. It draws implications and insights relevant to my research about the impact of intra-team relations on VC financing for GOEVs. Attributes discussed include VCs’ experience, firm differentiation, and the notion of a VC’s cognitive ‘fit’ / chemistry with the entrepreneur-leaders of investment prospects.

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VC Investing

VC Investing

1VA

Draft

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Experience, Diversity, Fit

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A Stipulative Definition of Entrepreneurship

Entrepreneurship is a social process of venturing aimed at creating value and involving activities such as opportunity identification or creation, innovation, developing exploitation strategies, business formation, marshalling resources, and execution & adaptation of strategies, which are typically performed in progressive stages.

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Entrepreneurship

Entrepreneurship

2E1

Final

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Research

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Business Enterprises & VC Activity in Canada (2016-2020)

The information in this paper was compiled to provide an economic context for my PhD dissertation – particularly a focus on a segment of high-growth firms which may be candidates for VC investment. It contains summary information about Canadian business enterprises (e.g. numbers, size, growth, transitions, and related employment) and venture capital activity.

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Entrepreneurship

Entrepreneurship

2E2

Final

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Canadian Business

Overcoming Conventional Resource Constraints in New Ventures

I was invited by Startup Canada to write an article for their inaugural Thought Book (2014). It is really about non-conventional entrepreneurial thinking models - specifically effectuation and bricolage. These modes of thinking can be useful for getting a start-up venture in motion when you don't have all the resources you desire. Of course, that is one of the defining attributes of entrepreneurship (see my article #2E1: "A Stipulative Definition of Entrepreneurship").

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Entrepreneurship

Entrepreneurship

2E5

Final

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Thinking Models

Bricolage: Making Do With What is at Hand

I was invited to lead a team of authors to write a book chapter in Routledge's Companion to Entrepreneurship. The attachment is a printer's proof of Ch.10 on entrepreneurial bricolage - which was reviewed by Ted Baker who is probably the world's expert on the subject. The concept of bricolage originated with Levi-Strauss who did not conceive of its potential application to entrepreneurship. When an entrepreneur’s behaviour shifts to bricolage, his/her thinking might go like this:
- I can’t seem to access the resources I want (at this time);
- But I must solve the problem1 before me (now);
- So I’ll try new and varied uses and combinations of all that I can access readily; and, . . .
- Create a workable solution (for the time being)!

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Entrepreneurship

Entrepreneurship

2E6

Final

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Thinking Models

Teams, Teamliness, and Team Effectiveness Explained

‘Teams’ has been an organizational buzzword for two decades. We watch team sports; perhaps even play them. We have so-called teams at work. But, do we really understand what makes entrepreneurial teams most effective … and how to design and manage them to be so? Because let’s face it – for some activities, “it is difficult to clap with one hand”!

A working understanding of teams, dyads, and social interaction in the entrepreneurial context is essential for both research and practice. But, how many of us have received any specialized training during our lifetime on team design, team building, team effectiveness, and team maintenance? Or, how many of us have had the luxury of sufficient time to read and research these ideas? Such an understanding is critical to my PhD research and to my post-doc coaching practice because:

1. Teams can be more effective at creating & sustaining value than solo entrepreneurs;
2. VCs do not know how to adequately assess teams;
3. Different types of teams are required for different entrepreneurial purposes;
4. CFOs or other professionally-qualified financial managers are key members of entrepreneurial management teams; and,
5. The theoretical support for team effectiveness in psychology and organization/management literature lends credibility to the research findings in my PhD dissertation.

This articles condenses what we know about teams, teamliness, and team effectiveness into a single handy reference for researchers and practitioners alike.

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Management Teams

Management Teams

3T1

Final

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Psychology

Team Composition & Development

Understanding how teams are often formed and evolve or develop will provide the reader with insights they can use about designing, developing, and sustaining teams for specific purposes. In my PhD research, the ultimate purpose is the balanced composition of an entrepreneurial management team that understands how to collaborate and is effective in creating and sustaining enterprise performance and value accretion.

I recommend conscious consideration be given to: (1) team composition as early in the forming stage as possible; and, (2) that key stakeholders (e.g. owners / investors such as VCs and the EL/CEO) not only prepare themselves for some time for development, but actively sponsor such development and monitor its progress, just as they would any task related to enterprise performance. This approach will translate into recruiting criteria, not just for filling the functional chairs around the executive table “to get the (preconceived) job done”, but to consider elements of person-group fit and the interpersonal synergies that can enhance team effectiveness and with it, enterprise performance – including a possible compression of its timeline.

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Management Teams

Management Teams

3T2

Final

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Psychology

Top Management Teams & Upper Echelons Theory

This article reviews the nature, purpose, and composition of 'Top Management Teams' and considers possible differences between those in established organizations and those needed for growth-oriented entrepreneurial ventures ('GOEVs'). It summarizes Upper Echelons Theory (‘UET’), including refinements since originally proposed in 1984, implications for diversity (i.e. team heterogeneity), and criticisms of UET that may need to be considered in evaluating the findings of my PhD research related to entrepreneurial management teams and VCs' assessment of them. Finally, it identifies and describes the Management Decision Quality / Enterprise Performance Paradox.

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Management Teams

Management Teams

3T3

Final

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Strategy

Introducing ... Entrepreneurial Management Teams ('eMTs')

Extant literature in entrepreneurship research discusses "entrepreneurial teams". But, my PhD dissertation distinguishes between two types of entrepreneurial teams corresponding to the exploration and exploitation phases in the Venture Life Cycle. These are: Founding Teams (focused on problem-solution innovations) and Entrepreneurial Management Teams (responsible for commercialization, growth, and value realization). This distinction has important practical implications for team composition & development and venture investing decisions & success. Thus, it should be understood not just by team leaders, but by all team members and sponsors of team development (my recommendation is that this is a potential role for VCs). It is also important for researchers to make this distinction in entrepreneurial teams to facilitate comparison of studies for relevance.

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Management Teams

Management Teams

3T4

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Entrepreneurship

Understanding Diversity in Teams
& its Impact on Performance

The effects of diversity in groups have been the subject of hundreds of articles in the psychology and organizational management literatures. While Hambrick & Mason (1984) did not explicitly use the term, functional diversity among the members of top management teams is a key element of their Upper Echelons Theory. Given the importance of the concept and the differential effects of homogeneity vs. heterogeneity (i.e. diversity) in certain entrepreneurial teams, this article explores the meaning of diversity and evidence of its impact on team effectiveness. It explains the Diversity-Process-Performance Linkage and concludes with conditions and recommendations for realizing its potential benefits. These influence recommendations for achieving effective working relations between the entrepreneur-leader and the CFO, as well as the larger team, with particular emphasis on social integration processes to develop cohesiveness.

Readers may find these recommendations resonate in light of recent geo-political debates about diversity (and what some perceive as the failure of many poorly managed 'DEI' initiatives), immigration, and (the lack of) integration.

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Management Teams

Management Teams

3T5

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Teamliness

Conflict, Cohesion, and Mechanisms for Resolution & Achievement

From Upper Echelons Theory, we understand that enterprise performance depends on the quality of decisions emanating from its top management team, the antecedents of which are the tandem effects of functional diversity and effective social interaction to leverage such diversity effectively. Additionally, all members’ consensus in and affective acceptance of team decisions are jointly necessary to sustain team effectiveness and desirable enterprise performance. But, developing consensus and maintaining positive affect is actually hindered by the key factor underlying management decision quality – diversity. The effects of diversity in groups and teams generally involves conflict – which must ultimately be resolved through managed, appropriate social interaction processes. In turn, effective and sustained resolutions can help achieve group cohesion and attributes of ‘teamliness’ such as cooperation, collaboration, and effective joint decision-making. This article summarizes what we know about intra-group conflict, cohesion, their impact on team effectiveness, mechanisms for conflict resolution, and connections to enterprise performance.

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Management Teams

Management Teams

3T6

Draft

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Teamliness

Social Interaction Theory: Factors that Impact a Person's 'Fit' with their Environment & Team

Team-driven entrepreneurship is both prevalent and more successful than for ventures founded and led by solo entrepreneurs. According to Upper Echelons Theory, the main advantage of teams derives from the positive effects of combining a nucleus of people with diverse functional KSAs. This is particularly valuable in entrepreneurship and venturing where the nature of challenges and decisions to be made is complex and ambiguous. But it is naïve to assume that simply installing a team leads to successful performance. The situation is confounded by the fact that the diversity of talent brings with it a diversity of personalities and characteristics that often generate conflict of various types – a reality that must be managed through team processes to avoid dysfunctionality & delays and realize the benefits of teamwork.

Understanding how teams can be most effective in the entrepreneurial context is important to multiple stakeholders in our entrepreneurial ecosystems. Social interactions are a fundamental and essential component of team processes, impact task performance, and determine team effectiveness (both short-term and long-term) & ultimately enterprise performance. Social interaction processes involve ‘the six Cs’ of communication, coordination, conflict, conflict resolution, cohesion, and cooperation/collaboration, as well as information exchange and interdependent structures This article explains these factors and how they work together.

Why is this so important to entrepreneurial venturing and related investment? Because as these enterprises transition through the venture life cycle, the challenges and opportunities they must address become more varied and complex. This requires team additions which compounds functional diversity and the potential for conflict and debilitating effects on team effectiveness. While teamwork remains crucial for for performance, it is unlikely to occur organically and requires conscious management of various social interaction processes in team design & development, including recruitment. Team commitment and leadership have strong and significant influences on venture success and to achieve success in all relevant dimensions, a team-centric approach to team-building that incorporates the notion of 'Person-Team fit' and not simply 'Person-Job fit' (e.g. hiring any professional accountant to be CFO) is required.

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Management Teams

Management Teams

3T7

Final

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Fit

Cohesion-Performance Relationship in Team Sports: Lessons for Entrepreneurial Management Teams

When we think of examples of high-performance teams, perhaps many of us think of our favourite professional sports team (as a Canadian man, I was ‘born with skates on’ so I think of our national sport – ice hockey). The cohesion-performance relationship in sport has been the subject of extensive research in sport psychology. There are similarities between elite sports teams and entrepreneurial management teams that impact their cohesion - such as having defined roles/positions/functions, the existence of common (overarching) goals, the need for some degree of interdependence, and the need for mutual respect and of course cooperation/collaboration. But, aside from some fundamental differences in the nature of their respective ‘games’, there are also differences – primarily in their functional heterogeneity and, in my judgment, the clarity & precision of common goals, the nature & extent of interdependence & collaboration. This article explores these issues from the perspective of what entrepreneurial management teams can learn from exemplars that is relevant to apply to their more ambiguous circumstances.

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Management Teams

Management Teams

3T8

Final

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Teamliness

Financial Management Hypothesis for Growth-Oriented Entrepreneurial Ventures

A New Substantive Theory Derived from my PhD Dissertation

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Management Teams

Management Teams

3T9

Final

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Theory & Concepts

Roles, Responsibilities, and Expectations of CFOs in Business Organizations

The CFO is responsible for planning, organizing, directing, monitoring, and controlling all the financial functions of an enterprise. But the roles & expectations of the modern CFO transcend these well-recognized functions. Their evolution illustrates the significance of this actor's contribution to management teams as the roles & expectations have expanded from steward through corporate strategist to enabling business partner focused on creating, enabling, preserving and reporting on the enterprise's value. This is particularly important to growth-oriented entrepreneurial ventures because their mission is value creation, but the environment in which they operate poses a multitude of challenges.

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CFOs

CFOs

4C1

Final

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Professional Value-Added ('PVA')

CFO Functional Competencies and Knowledge, Skills & Abilities ('KSAs')

This article compares the financial management needs of growth-oriented entrepreneurial ventures with the competencies available in a certain category of professionally qualified persons (CPAs) in Canada who could potentially be qualified financial managers ('QFMs') in growth-oriented entrepreneurial ventures ('GOEVs').

My interviews of Canadian VCs revealed that their investees needs for a range of financial management services is a function of organizational complexity which increase as the enterprise evolves through stages-of-development in the venture life cycle. Interestingly, there is a range of levels of competency in financial management that can cater to GOEVs evolving needs. Increasing breadth & (sometimes) depth of competencies are associated with progressions in the rank/title of various financial management positions such as chief accountant, Controller, Director of Finance, VP Finance, and CFO. My research indicates that VCs typically recommend investees hire financial managers based on enterprise needs and that tends to lead to a series of hirings & terminations (frequently rationalized as "unsuccessful hires"), primarily driven by cost considerations. In my opinion, such decisions should be value-driven rather than cost-driven and I do not believe most VCs have a full appreciation for the value available from financial managers with the highest levels of competence, let alone the savings in cost & enterprise development time from an earlier, more competent hire.

I reviewed what scholarly literature was available on this issue and it was scant - just a single article. The authors identified four financial management activity domains relevant to new firms – strategic financial management, external financing, financing through operations, and financial controlling, each of which requires respective specific competencies. Further, they determined that the level of competence typically available to small firms was, at best, limited. My article identifies several criticisms of this assessment and perhaps the most significant, in my opinion, is that none of the authors’ background/education indicates any professional accounting or finance qualifications. Therefore, it appears that their study did not have the ‘benefit’ of the 'Financial Management Lens Perspective' (see article #5R9.2023). Accordingly, I will create an update of this article which enhances GOEVs financial management needs using both that perspective and my article on relevant metrics for the enterprise performance of GOEVs (#1V4.2022).

This article also provides a summary of the enabling and technical competencies of a certain category of professionally qualified persons (CPAs) in Canada who could potentially be QFMs in growth-oriented entrepreneurial enterprises. Obviously, members of the CPA profession have differences in length and contextual-relevance of experience. So, the competencies enumerated in this article represent the minimum competencies. As the CPA professions requires members to engage in continuous professional development, some opt to engage in in-depth CFO training which markedly elevates their competencies. I am not aware that such CFO training focuses on the GOEV context specifically. So, I am exploring that possibility with the Chartered Professional Accountants of Ontario. Several other articles on this website and my PhD dissertation refer to these CPA competencies in identifying ways that CPA-qualified financial managers can add value to GOEVs and their VCs (see also article #4C6.2023).

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CFOs

CFOs

4C2

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Professional Qualifications & KSAs

CFO Personal Attributes

Personal attributes or characteristics of all management team members may impact the social interaction processes, acting through conflict and cohesion/teamliness, which impact team effectiveness. These characteristics my be ascribed (e.g. demographic), developed (e.g. psychographic, such as values, beliefs, attitudes, personality), achieved (e.g. education), or behavioural. Required and desirable personal characteristics of entrepreneur-leaders and qualified financial managers were explored through interviews with Canadian VCs during my PhD research and are summarized in my dissertation. Therefore, this article seeks to understand what has been explored in the literature as a basis for comparison.

VCs' desirable functional and social attributes for CFOs include: (i) developing & maintaining an effective working relationship with the entrepreneur-leader/CEO; (ii) developing & maintaining effective working relationships with other management team members and the Board; (iii) effective cash management capabilities, including adaptability/flexibility; (iv) a future orientation that understands the path of progress and milestone checkpoints and how to achieve them; (v) in control of information that can be shared with a range of stakeholders to encourage their continued commitment to the enterprise; and, (vi) a personal network of allies that can assist the enterprise.

However, achieving these aims is not as easy as completing a checklist. As other articles in my 3-series and 4-series have indicated, achieving effective working relationships requires both an understanding of and capability to manage various social integration processes due to differences in personalities, traits, and other personal characteristics which frequently differ between financial managers and other management team members (often because of significant differences in career paths that lead to differences in cognition & thinking models). Also, it is important to recognize that managing and leveraging such typical differences can be significantly beneficial to enterprise and investment performance because the differences are often complementary in their organizational benefits. Realizing such complementarity contributes to the entrepreneur-leader and CFO achieving "Dynamic Duo" effectiveness.

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CFOs

4C3

Draft

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Psychology

CFOs in a High-Growth Entrepreneurial Ventures

The importance of financial management capability to new ventures has been documented, but managing this critical role in high-growth new ventures (‘HGEVs’) has not been addressed in the literature, except in family firms and large corporations. For example, HGEVs typically require significant amounts of financial capital to fund innovation, product/service development, and negative operating cash flows during the initial phases of commercialization. That capital also needs to be deployed effectively and efficiently (due to its scarcity and cost) in support of achieving the venture’s goals & objectives. Thus, the financial management needs of HGEVs require something more than basic competencies. These are itemized in my dissertation (§8.1-8.2).

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CFOs

CFOs

4C4

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Entrepreneurship

CFO Relations with the Entrepreneur-Leader

What are the antecedents for a CFO to be a good "wingman" to the entrepreneur-leader or for achieving the emergent 'Dynamic Duo' state between them?

The CFO & CEO roles are viewed somewhat as counter-forces in public firms – the realism (some would say conservatism) of CFOs counter-balancing the optimism of CEOs. Yet, in the course of business partnering, “A good CFO should be at the elbow of the CEO, ready to support and challenge him/her in leading the business”. But, naturally-occurring differences in these two officers' personal attributes have a propensity to stir conflict. Nevertheless, these can be overcome, even leveraged, through informed management sensitive to various social interaction processes.

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CFOs

CFOs

4C5

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Fit

20 Ways CFOs Can Improve Performance for GOEVs & VCs and Have a More Rewarding Fit in Their Enterprise

My PhD dissertation explores how (professionally) qualified financial managers (‘QFMs’, such as CFOs & VPs of Finance) do and potentially can help improve VCs’ investment performance. This can occur directly (e.g. through commonly recognized services of governance, control, and reporting). But, it can also occur indirectly through professional value-added (‘PVA’) focused on improving & accelerating investee enterprise performance in ways that matter to growth-oriented entrepreneurial ventures of ‘GOEVs’. Many of my articles available on www.macmaster-ecfo.com will contain recommendations or considerations for how QFMs can make such contributions. This article consolidates all of those recommendations & considerations into one handy place.

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CFOs

CFOs

4C6

Final

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Professional Value-Added ('PVA')

What is an eCFO?

My PhD dissertation contemplates a best-fit, professionally-qualified financial manager for meeting the financial management needs of high-growth, venture-backed, entrepreneurial ventures. I called such a person an entrepreneurially-minded CFO or 'eCFO'. Distinguishing attributes of an eCFO were generated from Canadian VCs’ responses to a specific a research question, interpreted through a financial management lens. Their suggestions were organized into categories of relevance based on the review of three bodies of literature. The categories are Person-Environment fit, incremental financial management competencies (i.e. functional KSAs), interpersonal & relationship management skills, and personal attributes. The issue of role duality was excluded because it is not incremental to the notion of an eCFO since it exists for all levels of financial management.

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CFOs

CFOs

4C7

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Entrepreneurship

How to Achieve Effective Working Relations between the Entrepreneur-Leader and the CFO

As GOEVs evolve through their stages-of-development in pursuit of creating value, the challenges and opportunities they encounter will become more and varied. The scope of issues for management will likely transcend the capacities of a single individual, which may account for why studies indicate that team-driven entrepreneurial enterprises are more successful than solo entrepreneurs, on average. Accordingly, GOEVs will need to expand their entrepreneurial management teams by adding (and ideally retaining1) talent with functional diversity – for example, to manage their expanding and diversified needs for various aspects of financial management2. But, the benefits of increased functional diversity come at a cost – challenges to cohesiveness/teamliness, like different types of conflict. Thus, effective teamwork remains a crucial factor for enterprise performance.

The relationship between the entrepreneur-leader and the financial manager (e.g. a CFO) is visible to many stakeholders. Capturing and retaining the engagement and commitment of stakeholders is essential for the enterprise to achieve several goals. Engagement can be impacted by stakeholders’ assessments of the performance of interdependent work and perceptions of the nature of relationships within the enterprise’s management team and particularly the relationship between the entrepreneur-leader and the CFO. The effectiveness of their relationship depends on five factors: environmental factors (impacting ‘fit’), roles and expectations (particularly understandings by each party), the particular knowledge/skills/abilities (‘KSAs’) of each party (both functional and social), the nature & quality of social interaction processes involving the parties (including interdependence and types of conflict), and the outcomes of those interactions (including a posteriori assessments of fit). This article discusses all five factors and recommends conditions for achieving this dyad achieving the state of a 'Dynamic Duo'.

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CFOs

CFOs

4C8

Final

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Fit

Recruiting the Ideal eCFO for Your High-Growth Entrepreneurial Venture

As Canadian VCs consider the financial management needs of growth-oriented ventures are stage-of-development dependent, I have created an echelon of recruiting criteria that matches the evolution of need. These are presented in a pyramidal structure within the article (Figure 1). The base level comprises core functional capabilities which are foundational to the provision of basic financial management services (e.g. accounting and financial reporting). As a second, albeit optional level, VCs considered having relevant industry experience or domain expertise to be a benefit because it reduces the time required for learning a new industry's modus operandi. The third level comprises higher order financial management competencies which are commonly accompany experience of higher ranked positions (like VP Finance or CFO). For example, these can include financial strategizing, more comprehensive business planning & modelling, financial forecasting & scenario analysis, MDA-quality financial reporting & interpretation, and capital-raising). The fourth level distinguishes an entrepreneurially-minded CFO from those professionally-qualified and experienced financial managers that may be better suited to an established, stable organization. The associated 10 (or 12) distinguishing attributes are identified in article #4C7.2023. Finally, the notion of an 'ideal eCFO' must be entity-specific owing to the uniqueness of both the venture's TPM opportunity and the idiosyncrasies of its leader. Therefore, the ultimate criterion if Person-Person fit with the specific entrepreneur-leader.

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CFOs

CFOs

4C9

Draft

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Fit

Recommendations to eCFOS for Joining, Navigating, and Managing in Entrepreneurial Managements Teams

The recommendations in this article derive from three sources – two from extensive research in my PhD dissertation, including: (i) the collection and analysis of data from in-depth interviews of 16 Canadian venture capital investment managers; and (ii) detailed reviews of three streams of literature (VC-investing, management teams, and various aspects of CFOs as financial managers); plus, (iii) lived experience from being a member of the founding or entrepreneurial management team in six growth-oriented ventures. The article describes what is required to achieve team effectiveness, the natural process of team development, the natural challenges arising as consequence of the CFO’s role duality and frequently differences in personal characteristics – not just personality, but the sophistication of their mental models that influence their business recommendations. Most importantly, recommendations are made as guidance for CFOs to resolve these challenges as an embedded team member.

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CFOs

4CA

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Teamliness

Placeholder Image

A Complete Research Design Schema

When I started my PhD journey, completed the coursework, and began planning my research, it seemed like there were so many decisions to make. As a novice, it was overwhelming. I read several textbooks on the subject and while each made sense, they did not all seem consistent. But, one in particular resonated with me and I have laid out in this article a schematic of the process required to design a research approach. In addition, I have enumerated the options available for each choice in my qualitative study. You can follow the process in sequential order for the most part. But, don’t be surprised if it becomes a bit iterative. In other words, some choices you make later (e.g. a method choice like Grounded Theory), may cause you to return to and revise previous choices (like philosophical perspective) in order to achieve an integrated and internally consistent approach. I hope that this will help other PhD students process through the key design decision in a rational manner – especially those who perceive a lack of direction from their supervisor. The only caveat about this process diagram is that it does not include a mechanism for ensuring internal consistency of all the choices. Nor should it – I didn’t intend for this to be a form you fill out and your done. Rather, the researcher should study the elements or building block sufficiently well to know in advance that they will integrate. If you don’t, the recovery or redesign effort is likely to be longer and may not even be possible from an epistemological perspective. I recommend this article for all PhD candidates planning their research methodology & design.

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Research

Research

5R1

Final

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Methodology

Pragmatic Constructivism (Synopsis)

Pragmatic Constructivism combines several of the most useful aspects of Pragmatism and Social Constructivism and informed my philosophical stance in my PhD dissertation.

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Research

5R2

Final

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Philosophy

Pragmatism: Evolutionary Development & Principles

Pragmatism has developed in three phases - the third representing a resurgence in the late 20th century. The contributions of Peirce (Pragmatic Maxim, fallibility of knowledge), James (cash value metaphor for usefulness), Dewey (instrumentalism, logic of inquiry, warranted assertibility) and more contemporary philosophers are summarized in the full article. Some have described Pragmatism as a philosophy that helps humans cope with their environment, but I prefer to think of its application to entrepreneurship (not entrepreneurship research) in a more positive way: that the usefulness of knowledge helps us to thrive!

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Research

5R3

Final

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Philosophy

Social Constructivism vs. Social Constructionism

Social Constructivism is concerned with how individuals mentally construct their worlds4 in a social context. This includes using categories/classifications supplied by social relationship (Fletcher (Ch.8) in Fayolle, 2007: 164, 168). This emphasis is the one most frequently applied in entrepreneurship research (Fayolle, 2007: 13).

Social Constructionism primarily refers to an ontological position about the social world that asserts social phenomena, their categories, and meanings are developed by social actors at a particular time, particularly through interaction, and are in a constant state of revision or reconstruction as changes in a situation (place, time, actors) warrant (Bryman & Bell, 2011: 22-24). In recent years the concept has been used to describe researchers’ own accounts of the social world and so it can have an epistemological aspect (ibid.).

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Research

5R4

Final

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Philosophy

Philosophical Perspectives for Entrepreneurship Research

PPT for a workshop presented at the CCSBE Annual Conference (2012)

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Research

5R5

Final

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Philosophy

A New Philosophical Perspective for Qualitative Entrepreneurship Research

My PhD dissertation employs an uncommon philosophical perspective. Yet, I believe it is highly appropriate for entrepreneurship research - particularly of a qualitative nature. This article begins by justifying such uncommon perspectives so long as they are relevant to the particular research. It follows with a high-level illustration of the choices of structural elements (axiology, ontology, epistemology) relevant to this social research study, leading to the conclusion that Pragmatic Constructivism (‘PC’) offers an appropriate consolidated perspective for understanding the phenomena investigated.

Following a description of each structural element, the alternatives therefor are explained and the choices made are justified. A simple illustration sums up how Social Constructivism, Pragmatism, and Interpretivism interact and are incorporated into Pragmatic Constructivism.

Finally, support for a Pragmatic approach to entrepreneurship research is provided.

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Research

5R6

Draft

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Philosophy

The Concept of Bounded Rationality in Decision-making

Bounded rationality represents a class of rational decision-making approaches that describe how humans actually make decisions in specific contexts (e.g. VCs' investment decisions), in comparison to theoretical models of ‘rational optimization’. Thus, a gap exists between normative decision-making models and actual behaviour.

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Research

5R8

Final

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Theory & Concepts

Researcher Identity Memos: Reflexive Writing for Balancing Qualitative Rigour & Phronetic Contribution in Research Design

This paper submitted to the XIIIth Actor-Reality Construction Conference addresses:
- the Mandate of Qualitative Rigour: Objectivity, Assumptions, Bias
- some Phronetic Design Issues:
(Axiology, Context, and Solidarity with research subjects)
- the need for a Researcher Identity Memo
- what a Research Identity Memo is
- benefits of a Researcher Identity Memo
- how did these ideas influenced / impacted my research
- a personal example of a Researcher Identity Memo
- an anecdotal application & assessment.

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Research

5R9

Final

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Methods

In-depth Qualitative Analysis - Examples of VC Research Memos

Restricted - contains anonymized research analysis useful for future collaborative research. Please inquire if interested in collaboration.

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Research

6D1

Restricted, please inquire

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Data

Analytical Highlights of Semi-Structured Interviews of Canadian VCs

Restricted - contains anonymized research analysis useful for future collaborative research. Please inquire if interested in collaboration.

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Research

6D2

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Data

VCs' Capabilities in Assessing eCFOs & Entrepreneur-Leaders

Restricted - contains anonymized research analysis useful for future collaborative research. Please inquire if interested in collaboration.

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Research

6D3

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Findings

Selected Financial Reporting Objectives (IFRS)

Accounting and financial reporting is based on professional standards aimed at providing a common language for communicating the financial performance and financial position of business entities around the world. The foundation for these professional standards in most jurisdictions – International Financial Reporting Standards (‘IFRS’) – is the Conceptual Framework for Financial Reporting (International Accounting Standards Board (IASB), 2018). These accounting and financial reporting standards are used by public companies in Canada and the UK and the SEC in the US permits foreign companies to use IFRS. This paper highlights extracts from IFRS’ Conceptual Framework (ibid.: A17-A19) that I consider relevant to the assessment of the financial performance and financial position of business entities that I focus on in my dissertation – i.e. growth-oriented entrepreneurial ventures (‘GOEVs’).

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Financial Reporting

Financial Reporting

7F1

Final

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Professional Standards

Valuation of Private Equity Investments in Practice

Academic research has indicated that venture capitalists (‘VCs’) place little reliance on conventional valuation models in estimating the values of early-stage ventures (‘ESVs’) due to the unreliability of such enterprises’ expected future cash flows (e.g. (Miloud et al., 2012: 152-153)). That is not entirely accurate and reflects a research gap. There are other common valuation approaches which may be applicable (such as the market comparables approach), particularly based on large numbers of similar deals that many VC-firms have executed – especially if such deals are concentrated in a few industries where a VC-firm has developed domain expertise. Many VC-firms have developed knowledge, skills, and abilities for valuing private companies due to requirements to comply with the financial reporting requirements established by recognized professional accounting standard-setting bodies.

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Financial Reporting

Financial Reporting

7F2

Final

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