PhD Dissertation: Abstract

Prior research indicated that VCs do not fully understand their own decision processes and have difficulty assessing entrepreneurial capital. Further, many VCs continue to focus on the entrepreneur-leader ('EL'). While there are abundant reasons to assess the EL and his/her entrepreneurial capital, VCs seem to be overlooking the importance of the rest of the team: it is difficult to clap with one hand. One key team member that can enable the EL/CEO is an appropriately fitted CFO - one that thrives in the uncertain & ambiguous environment of high-growth entrepreneurial ventures. While prior research suggest team-driven ventures are, on average, more successful than solo-led ventures, researchers have not explored the composition of such teams, prerequisites for effectiveness, nor the value-contributions of specific individual members. In particular, they have ignored CFOs or other professionally-qualified financial managers ('QFMs').

This qualitative research study rectified that gap. By interviewing 16 of Canada's top VC investment managers and analyzing their responses using grounded theory with a financial management lens perspective, it explores how QFMs currently influence VCs investing decisions and post-investment activities. I found that the scope & depth VCs' responses varied markedly by their experience.

These interviews revealed some surprising findings. For example, contrary to prior research, today's VCs seem more focused on the technology/product/market opportunity than management, although the individual entrepreneur-leader ranked as the second most important investment decision factor. But, little attention was afforded to teams. And, due to the earlier stages at which VCs seem to be investing, QFMs or CFOs do not seem to be of paramount concern in the early stages. This is due to: (i) a misperception of the cash cost of an appropriate QFM/CFO; and, (ii) VCs' assessment an investee's need for the higher order capabilities of a CFO arising in their later stages-of-development, as the complexity of their financial management needs increases. As a result, this study identifies two uniquely different types of entrepreneurial teams: founding teams (focused on explorative activities like innovation) and entrepreneurial management teams (responsible for commercialization, growth, and proving valuation). This study also discovers a natural conflict typically exists between ELs and CFOs and reasons are explained, as well as recommended solutions. I reason that VCs are overlooking a valuable opportunity to both the investee and their own returns by deferring the onboarding of a competent, appropriately fit QFM/CFO. Seven criteria are identified for matching an ideal CFO candidate to the EL; these should avoid VCs' reported recruiting mistakes and lead to creating a "dynamic duo" in investees management teams.

This study's unique contributions to research include the introduction of Pragmatic Constructivism as a new philosophical perspective appropriate for entrepreneurship research and introduces the concepts of entrepreneurial management teams and entrepreneurial CFOs. It is distinguished from other research by interpreting research data through a 'financial management lens perspective', yielding contradictory results. This research also clarifies and extends appropriate measure of enterprise performance for growth-oriented entrepreneurial enterprises and makes some contributions to theory including a new theory: "Entrepreneurial Management Team Theory".