A Venture Capital Model for Transitioning Economies: The Case of Poland

Abstract

The venture capital investment process is examined in a transitioning economy. The move from a planned economy to a free-market system confronts venture capitalists and entrepreneurs with an environment not typically encountered in developed countries. This may include high inflation, immature capital markets, a nascent legal system, and a dearth of managerial talent. Using interviews and follow-up questionnaires with a sample of Polish venture capital firms in 1995, I develop a new model of the investment process and identify specific evaluation criteria used by venture capitalists in transitioning economies. The implications of these results for venture capital firms are discussed briefly.

JEL Classification: M13, P20, G15, G32, F34