Venture Capital Run by Private or Governmental Interests - A Comparative Study on the Investment Decision Process in the Swedish Market

Sammanfattning: Governmental and private venture capital firms have been known to differ in various ways. There is research on the differences in goals, performance and post-investment behaviour of those two kinds of organisations but none examining and comparing their investment decision process. This thesis builds on previous research in the field and explores the question of how the differences in the motivation of employees and investment goals between governmental and private venture capital funds in Sweden influence the investment decision process. An in-depth qualitative study consisting of interviews with the major governmental and private venture capital firms in Sweden as well as a number of entrepreneurs was deployed. In line with previous publications, the results show that private VCs have only financial goals while the governmental VCs pursue more strategic goals like the creation of employment or the stimulation of the economy. Furthermore, in order to reach their respective goals, different incentives to increase the employees' extrinsic motivation are applied. Private VCs try to motivate their employees with monetary incentives like bonuses or the participation on the upside of an investment. Governmental VCs on the other hand have less focus on monetary incentives. Furthermore, the study provides the insight that the differences in goals and employee motivation mainly affect the deal origination and screening stage of the investment decision process. Due to their goal of educating the market, governmental VCs spend a lot of time for screening every incoming application for funding. This extensive process reduces time to actively search for potential investments. In the private sector the monetary incentives encourages the employees to actively search for promising investment opportunities.