The venture capitalists’ involvement with investee firms is not a well-researched area in the Indian context. The present study, which uses a survey research methodology, administered two different surveys to capture the empirical aspects of this relationship. The study finds that the board size increases after a venture capitalist becomes the nominee in the funded unit but the size of investment that these large boards seem to handle in most cases is small, which is generally counter-productive. By employing a non-parametric model, the present study finds that entrepreneurial teams require constant assistance from venture capitalists in terms of sourcing capital such as debt and equity in order to keep their performance targets. But the assistance offered by the venture capitalists does not seem to really make much difference in the performance because their advice in strategic issues and operational issues is not coming through sufficiently to entrepreneurial teams.

Newer technological innovations around the world have paved the way for the creation and profusion of new enterprises. Ambitious entrepreneurial teams have partnered with venture capitalists to pursue their aggressive visions and have created phenomenal wealth. On the flip side, some of these ventures have failed miserably. Why is it that the relationship between the entrepreneur and the venture capitalist worked in some instances but failed in many? This question becomes germane to understand the dynamics of this relationship that forms an essential determinant in shaping venture-engines. The role of the board in devising an appropriate strategy was earlier studied (Rosenstein, 1988). The study highlights board involvement in small and large firms and contrasts their contribution through an exploratory study. In another subsequent study Rosenstein at.el. (1993) highlight the influence of size and composition of venture capitalists on the board. The venture capitalists’ role as financial partners and as active outside managers of these investee firms needs to be investigated in the Indian context. While there exists a growing recognition in the recent past that supports the argument that shaping a new venture involves the relationship among the founding partner and financial agencies, there exists little literature in India in aspects concerning the venture capitalists and entrepreneurial teams. The information asymmetry associated with new ventures makes governance the crucial aspect between venture capital and entrepreneur’s relationship (Gompers, 1995). The purpose of screening new ventures and devising a practicable contract structure is to reduce agency costs.

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