Venture Capital as an Economy of Time

Abstract

Entrepreneurship is a social activity in which resources used to build new organizations are acquired through the social relations that combine to create a community structure. An important participant in this community is the venture capital firm. These organizations provide funding for new ventures and also help build the new ventures’ social capital. They do this by making social connections to other important actors and by providing advice. Venture capital organizations are constrained by shortages of time that rise in severity as the venture capital firm’s centrality in the community increases. As a result of these shortages of time, there is an inverse correlation between central location in the community and willingness to work with the entrepreneur whose venture is struggling. The most central venture capitalists are expected to display greater impatience with their portfolio ventures leading to different outcomes for those ventures defined in terms of three liquidity events: acquisitions, failures, and initial public offerings.