The role of private venture capital investors in enhancing value-adding activities and innovation of high growth firms in Uganda

Abstract

For more than three decades, private venture capital (VC) firms have been recognised for their pivotal role in advancing value-creation and innovation in high-growth enterprises. Recent studies have found VC as a viable driver for the economic growth of developed nations. Research shows that many technological global companies today started as small venture capital (VC) funded companies. However, less evidence is available in emerging economies to support value creation and innovation capacity provided by the VC companies in Uganda. Consequently, how and when venture capitalists (VCs) can give significant oversight and add value to their ventures beyond VC funding has remained unresolved. Therefore, we use survey data from 77 VC firms expounded by interview data from key respondents from the VC industry. Our study finds that VCs’ role is essential for nurturing value-added skills in VC-financed firms. Evidence was predictable in improved financial management, sales turnover, profitability, strategic planning, innovation capacity, recruitment, sound BOD, and a broad network for future funding opportunities. Our study contributes to the under-studied space of VC performance, especially in Uganda, where there is limited academic literature in this field. These results may support entrepreneurs/governments to engage in lucrative partnerships with experienced VC firms that can bridge the SMEs’ equity financing gap early. Finally, this study offers a foundation for future research direction.