Venture Capitalists Approach to Strategy and Corporate Governance of Portfolio Companies: the Case of Tbl Mirror Fund

Abstract

Venture capital refers to a full range of financial services provided by experienced professionals to new or radically innovative changing firms. The financial services include financing of ventures, providing expertise with business planning, providing industry knowledge, instilling corporate governance and providing guidance to management. The purpose of the study was to examine establish the approach of venture capitalists to the strategy and corporate governance of its portfolio companies. The study sought to determine the influence by the venture capitalist on the strategic direction of its portfolio companies, establish the corporate governance practice which the venture capitalist applies and the impact of these practices on the portfolio companies. The study was on one of the practicing venture capitalists in Kenya, TBL Mirror Fund. Primary data used in the study was collected using interviews which the researcher conducted with the Fund managers of TBL Mirror Fund. The results showed that the studied firm undertakes significant actions towards corporate governance and strategy re-direction of its portfolio companies. The firm assists to strengthen the portfolio companies’ governance system through proper due diligence, the appointment of a competent and independent board of directors, an appropriate management incentive program, establishment of a close relationship with management, and periodic management reports. The key to efficient governance is to give the portfolio firms support to focus on operational and strategic issues in the board meetings. Further studies should be carried out to determine whether the different characteristics of different venture capitalists lead to different approaches towards the strategy and corporate governance of their portfolio companies