Unravelling the Patterns in Venture Creation Processes

Abstract

Entrepreneurship in general and the creation of ventures in particular have received a lot attention in the previous decade in the public, political and scientific debate about economic growth and the stimulation of innovation. Despite playing such a prominent role, our knowledge about the processes of venture creation is limited. The existing research on venture creation processes has advanced our knowledge by detailing single cases of venture creation or analysing specific actions entrepreneurs undertake throughout the creation of a venture. Either approach has failed to unravel overarching patterns in the central processes of venture creation. The aim of this thesis is to do just that: Explore how venture teams are commonly formed, how ventures typically acquire funding, and how ventures approach developing their products. For this purpose, a large-scale study with 870 ventures was conducted in four European countries (Germany, Italy, the Netherlands, UK) and the US. In comprehensive interviews with the ventures’ founders the processes of venture creation were tracked in great detail from the moment a founder started talking about creating a venture until the point in time a venture reached sustained profitability. The longitudinal nature of the data allows me to introduce a novel method to entrepreneurship research: Optimal Matching. This methodology, unlike other methods used to explore longitudinal data, treats the entire process as the unit of analysis and is therefore particularly well suited to uncover patterns in processes. Optimal Matching calculates how similar processes are to each other by counting the transformation steps it takes to transform one process into another. In a next step, the processes are clustered based on their similarity. Because the processes in each cluster will be particularly similar to each other, every cluster in turn represents one commonly occurring version of a process. I use this methodology to explore the most central processes of venture creation: team formation, funding acquisition and product development. Based on the optimal matching results, I conclude that a finite number of approaches exists to each of these venture creation processes. Therefore, I assert that the venture creation process neither plays out in one uniform process, nor in a random order. The results also allow me to describe each of these commonly followed processes. The observed processes differ in terms of sequence of activities, process length, and whether a process is static or features transitions between different states. In summary, this thesis extends the existing research on venture creation processes in two ways. First, this thesis describes patterns in sub-processes of venture creation in greater detail than previous work. Second, the thesis shows that we need to take various characteristics of ventures and the venture’s context into account if we want to advance our knowledge of typical venture creation processes. In other words, finding one universal venture creation process seems unlikely. Instead, and building on this thesis, identifying distinct venture creation processes for distinct types of ventures is a worthwhile goal.