Geographies of relational coordination in venture capital firms

Abstract

Venture capital (VC) firms are crucial actors in entrepreneurial ecosystems. Through the development towards a digital economy, they have gained further relevance, which caused the VC industry to diversify in terms of business models. This article offers a new heuristic to study the VC industry by developing a classification of VC firms. By drawing on a framework of different dimensions of relational distance in investment relations, different types of relational coordination are identified by comparing VC firms in Germany. The types of VC business models are found to produce relational geographies of investing as they relate with their portfolio startups in different ways. A relational perspective on VC thus provides the opportunity to step beyond pure territorial approaches on VC.

Revisiting Relational Coordination: A Systematic Review

“…In primary care, shared spaces were conducive to developing relational coordination among providers (Bergman et al, 2016;Cromp et al, 2015;Faruquee et al, 2019). However, these findings did not hold up in the venture capital industry (Kuebart, 2019). The author theorized that this may be due to the fact that relational coordination is a form of proximity that does not depend on spatial proximity.…”

The geography of business angel investments in the UK: Does local bias (still) matter?

“…A number of studies have analysed the geographies of equity investments (predominantly VC) from a relational perspective. The term 'relational coordination' is used by scholars to summarize the governance of relational distance between VC firms' and their investee firms (Kuebart, 2019). Constructed relational geometries and found significant heterogeneity between different spatial finance communities in terms of their networks of connections, highlighting how VCs have numerous connections transcending regional boundaries.…”

“…There has been an upsurge of interest in relational geographies and how distance, relationships, and networks interact and mediate behaviour (Kuebart, 2019;Wray, 2012). The relational perspective offers insights into innovation activities (Faulconbridge, 2017) because within geographical bounded spaces, relationships, networks, social capital and 'buzz' are pivotal relational elements (Kemeny et al, 2016).…”

“…While distance is most commonly conceived geographically, it is also a proxy for cultural and social proximity (Bonini et al, 2018). In addition to functional proximity (distance), economic geographers use the concepts of 'cognitive' and 'relational' proximity, non-tangible proximities such as behavioural mind-set and trust with social and organisational dimensions (Herrmann et al, 2016;Kuebart, 2019;Wray, 2012). These factors also encompass things such as similar educational, social or professional backgrounds, mutual acquaintances, affinities through clubs/associations which give entrepreneurial actors common frames of reference (Herrmann et al, 2016).…”

“…Risk averse angels can piggyback on the due diligence undertaken by platforms and have their investments de-risked by small investors -the socalled 'crowd' (Langley and Leyshon, 2017) -obviating the need for physical closeness. So while the debate spatial proximity between investor and investee firms remains inconclusive, recent work suggests that some investors may be able to overcome negative distance effects by relational means (Kuebart, 2019;Wray, 2012).…”