Entrepreneurial Learning and the Role of Venture Capitalists

This paper develops a model of entrepreneurial learning in order to explain how VCs support the process of entrepreneurial learning and thereby add value to their ventures. We draw on two generic approaches to learning, termed the hypothesis-testing mode and the hermeneutic mode, which turn out to be closely interrelated in such learning processes. The resulting model comprises four categories, which focus on what entrepreneurs learn and how it is learnt: experimentation, evaluation, unreflective action and unverified assumptions. We then use these analytical categories to illustrate how VCs apply their different forms of expertise to increase a venture’s value once an investment has been made.