Date of Conferral
Doctor of Business Administration (D.B.A.)
In 2014, venture capitalist (VC) investments were as high as $87 billion for startup companies. Furthermore, although more than 50% of venture-backed startups failed, return on investment came from only 10% of the investee companies. The high VC investment dollars and the low number of profitable VC-backed startups suggest challenges that VCs might experience in identifying profitable startups. Using a real options theory conceptual framework, the purpose of this multiple case study was to explore strategies VCs in the southeastern United States use to identify profitable startups. Data collection included observation and archival document reviews and involved semistructured interviews of 11 VC participants in 8 firms who participated in assessing startups that led to an initial public offering or buyout within the past 5 years. Data analysis involved a coding technique for extrapolating themes. Several themes emerged including due diligence and investor involvement, reduction of information asymmetry, human capital management, environment and market forces, startup experience matching investor strategy, trust building, investment timing, and VC market dynamics. Findings from this study might contribute to positive social change by assisting VCs, entrepreneurs, and capital investors in identifying startups that lead to sustainable and profitable businesses. Sustainable and profitable businesses may result in stable jobs in the local community. Beneficiaries of this research include VCs, entrepreneurs, and capital investors.