'Venture Capital for the Future - Implications of Founding Visions in the Venture Capital Setting'

Ph.D. Dissertation by Miriam Garvi, Jönköping International Business School

Chapter Eight: Vision for the Future (pp. 183-188)

Introduction
The purpose of this dissertation was to elaborate on the venture capital phenomenon, by reflecting on particular venture capital initiatives and the implications of the visions for their founding. This journey has brought me from two contemporary initiatives in Sweden across time and space to a pioneering initiative that, with time, set-off a management fashion.
In this last chapter, I discuss differences of founding visions in terms of their elements and implications. I conclude by orienting these reflections towards the future.
On visions and their manifestations
In my research, I have taken a step back so as to focus on the founding visions of unfolding initiatives, a concept that incorporates a principle of complexity in terms of heterogeneous human interests, values and purposes (see Freeman & Philips 2002). Sifting through rich stories of meaning and practice, I have found three distinct visions, which I have labelled ‘fraternity’, ‘streamlining’ and ‘pioneering’ based on the visionary elements that I have identified and the implications of such elements as they are manifested in action.
Vision diversity
A study of founding visions brings focus to the intended purpose of an initiative including such aspects as its intended beneficiaries and the psychic income that is sought. Streamlining, fraternity and pioneering visions involve distinct impact on the socio-economic landscape in terms of the kind of ‘value’ that is intended and for whom. With a streamlining vision, value is generated in terms of harvested potential for those who control the resources. With a fraternity vision, value in terms of sustaining a desired life-style is generated for those who belong to a sphere. With a pioneering vision, value is generated in terms of new initiatives which will enrich the landscape for the benefit of society.
Streamlining, fraternity and pioneering visions are expressions of volition and commitment. A streamlining vision involves harvesting the untapped potential, generating psychic income in terms of power and recognition as the interests of one are placed before those of another. This cannot be played out transparently, for the motivation to cooperate relies on each affiliate believing that there will be gold to collect at the finishing line. The commitment generated by such a vision goes no deeper than a cost-benefit analysis of cooperation and defection (see the ‘prisoner’s dilemma’ in Cable & Shane 1997). A fraternity vision involves reciprocity, ensured through the leveraging of people of similar passion, which generates psychic income in terms of a sense of affiliation and the self-fulfilment that comes from making it happen. Commitment in a fraternity realm is sustained as long as expected advantages exceed membership obligations. A pioneering vision involves striving to fulfil needs that are not fulfilled otherwise or elsewhere. Here, loyalty is to the vision, rather than to a particular project or to the members of a group. People are committed to making a difference even in the face of privation and adversity when they value the sense of meaning that is generated in the engagement.
In this dissertation, I have applied the concept of vision to the venture capital setting. A conceptualisation of visions in terms of intended purpose, intended beneficiaries and envisaged psychic income is a contribution to our understanding of different kinds of visions and their implications. This incorporates the complexity of human nature into the study of economic activity. The concept of vision is characterised by much ambiguity, as it is brought into the various streams of strategic, entrepreneurship and leadership literature. Streamlining, fraternity and pioneering forms bring three dimensions to a concept that is typically treated one-dimensionally. In this sense, this research gives a higher resolution of the vision concept which may refine our reasoning regarding such issues.
The diverse nature of pioneering, fraternity and streamlining visions in terms of intended beneficiaries and psychic income have implications on the leadership and motivational levels. This would be interesting to explore further as part of our understanding of the role of founding visions and how they are brought to life.
Founding visions and their manifestations
Reflecting on visionary elements and their manifestations, I find that different founding visions entail different attitudes or positions vis-a-vis venture capital. The concept of Industrial (Venture) Capital is an instrument for a streamlining vision that is continuously refined as leaner instruments become available. The use of this instrument, and the reference to such an instrument, is dependent on management fashion. Even the organisational shell (Acacia) for the concept of Industrial Capital is a perishable asset which must eventually be exited in order to harvest its potential.
The concept of Sympathetic (Venture) Capital is an activity for living out a lifestyle consistent with values held in the founders’ network. When concepts (such as Competent Capital) threatening the desired lifestyle resonate within the sphere, it is an indicator that the founding vision is dying out, whilst people are struggling to find ways of filling the void and protecting what has been generated through joint effort. As a new way-of-thinking championed by late-comers takes its hold, founders find themselves looking for a different sphere where a fraternity vision may yet be lived out (cf. Hellgren & Melin 1993).
The concept of Creative Capital is a concretization of a pioneering vision that is challenging to articulate because it involves bringing something into the world that is yet unknown. The possible vehicles that may be envisaged for the fulfilment of such a vision (ARD, the Institute of Man) are bound only by imagination and so a pioneering vision for venture capital transcends venture capital as the objectified idea that we know today. In the experimental process of venturing into the unknown, a manifestation (such as ARD or its affiliates) believed to be effective at conception may prove to be ineffective, leading to the pursuit of new avenues for fulfilment.
The research in this dissertation illustrates the potential harmony or disharmony between visionary elements (encapsulated in the concept of founding vision) and visionary manifestations. The epithets for capital found in this research (industrial, sympathetic, creative) harmonise with the streamlining, fraternity and pioneering realms in which they were born. The concept of Industrial Capital makes sense as a manifestation of a streamlining vision, but not in the light of a pioneering vision nor of a fraternity vision, because it clashes with core values which carry intrinsic meaning to the founders in both of these contexts. Likewise, the concept of Sympathetic Capital, which makes sense from the perspective of a fraternity vision, carries no appeal to those who embrace a streamlining vision. Creative Capital does not fit with neither a streamlining nor a fraternity vision, because of the disharmony between the psychic income sought by such founders and the psychic income that can be expected.
It is possible to envision such visionary manifestations in settings other than venture capital. For instance, Doriot’s manufacturing class at Harvard Business School is a manifestation of a pioneering vision in an educational setting, which is well documented (see chapter 7). Research on founding visions in other settings would be interesting to pursue as it would further our understanding of visionary implications and the potential that lies embedded in a particular vision as it is brought to life.
Venture capital affiliation is considered a costly form of financing. There are both strategic and human costs involved as the stories in this dissertation illustrate. Understanding of different founding visions is valuable. A business founder will be able to look for a partner whose vision harmonises with his or her own. Likewise, a venture capitalist may better assess whether a prospect is compatible by considering the founding vision of the venture in question. Such vision compatibility will prove particularly valuable for those who are striving to bring a pioneering or a fraternity vision to life. These issues should also be relevant for other kinds of interorganisational relationships, such as mergers or joint ventures. 
Venture Capital for the future
Looking out over the socio-economic landscape, tensions between venture and capital remain. Perry (1988) raises the question of who will provide the much-needed support for radical product innovation, dwelling on how venture capitalists/partners with long-term views on venture development are outrivalled by venture capitalists/investors seeking short-term gains. Bygrave and Timmons (1992) express concerns that the ‘money, skills and inclination’ which characterised venture capital pioneers are in danger of extinction. What earned venture capital its name - its association with venturing into the unknown - has increasingly given way to more refined ways of harvesting wealth, leading to a shift in the very nature and definition of venture capital (see Etzkowitz 2002). Referring to venture capitalist practices and strategies, Bygrave and Timmons (1992:89) use strong terminology to this effect, such as ‘perversion’, ‘redefinition’ and ‘misnomer’. We could view this development in terms of the diffusion of techniques and models on a global scale, which are instrumental in creating or reorienting new and old businesses. Or we could see it as the continuous reformulation of prototypes (see Sahlin-Andersson 1996) in a fluid world. Or again we might reach through such fluidity for the intended purpose of unfolding initiatives.
Through such a lens, we see that a streamlining vision for venture capital will not support the kind of radical product innovation that both Perry and Bygrave and Timmons refer to, because any pioneering idea will precede the crest of a fad which will generate the necessary interest of a venture capitalist with such a vision (see Tredennick & Shinamoto 2001). Streamlining venture capitalists favour monoculture, not biodiversity. They shun revolutionary ideas because the outcome of such ventures is far too unpredictable. Here, being unique is about doing some aspect of the process differently than others in order to be perceived as distinct from competitors. In a world where all cats are greyish, the careful labelling of one’s particular shade of grey in order to create some sense of distinction appears especially important (cf. Thøger Christensen & Cheney 2000). Then purpose becomes a rhetorical exercise for retaining legitimacy and recognition from the outside world – reflected in management fashions of vision, mission and core values statements (cf. Levin 2000). Hence the strong need for brand building; for controlled exposure and attention to reputation. “You can be brilliant and have bad products and still succeed.”
The visionary roots of the venture capital idea have left their imprint on history, a legacy that is still reflected in contemporary translations. Socio-economic conditions of today, however, appear to favour streamlining visions for venture capital, thanks to the impetus of our pension funds that are driving investments downstream and to compensation systems which are closely tied to the firm’s returns (see Etzkowitz 2002). If we wish to see revolutionary ideas come to life which will enrich, rather than empoverish, our socio-economic landscape, then it may require the kind of dedication that was once represented by Doriot and his associates as they strove to pioneer what they believed would make a difference. It would be a loss, indeed, if venture capital would mean the death of visions and ideas that can change our conception of the system. Without them, there would be little new to refine and we might never come to enjoy what we have yet to discover.
In the visionary realm there is freedom to envision how we want our future to be, as a spark for new or renewed action. Research which through critical assessment of the past allows for the discernment of a constructive pathway for the future captures, to me, the essence of a research of hope. My quest into the realm of venture capital has come to an end, and I am richer for it. In a world where strong normative influences and powerful forces are shaping the socio-economic landscape, I will bear with me the experience that the vision and initiative in the form of a small, pioneering seed may serve to transform this landscape in ways that we have not thought possible.

References and Appendix see entire pdf