Factors Influencing Venture Capital Success and Risk: A Systematic Review

Document Type : Research Paper

Authors

yazd university

Abstract

This systematic review, conducted following PRISMA guidelines, synthesizes findings from 60 peer-reviewed studies published between 2010 and 2025 to investigate the key factors influencing success and risk in venture capital (VC) investments. The identified factors are categorized into four main groups: startup-related, external, investor-related, and institutional. Success in VC investments is primarily associated with a competent management team, investor expertise, innovative business strategies, and robust market positioning. Conversely, risks are heightened by stringent regulatory frameworks, market volatility, economic uncertainties, and institutional weaknesses, particularly in emerging economies such as Iran, where structural challenges persist. The review underscores several critical themes. First, the quality of the startup team is pivotal, driving operational excellence and strategic execution. Second, innovation serves as a dual-edged sword, presenting both opportunities for growth and risks due to market unpredictability. Third, contextual factors, such as government policies, regulatory environments, and cultural norms, significantly shape VC outcomes. The synthesis offers tailored insights for diverse VC contexts, including traditional, corporate, and sustainability-focused investments, while highlighting gaps in the literature, such as the underrepresentation of certain regions, industries, and emerging markets in current research. Recommendations are provided for investors, entrepreneurs, and policymakers to enhance strategic decision-making, improve risk management, and foster supportive ecosystems. The review contributes a structured theoretical framework grounded in agency theory, resource-based view, and signaling theory, providing a nuanced understanding of how these factors interact across global VC ecosystems. Although the protocol was not registered in a public registry like PROSPERO, it adhered to a pre-defined protocol aligned with PRISMA guidelines to ensure transparency and minimize bias in study selection and synthesis.

Keywords

References

  1. References:

    Ajagbe, A. M., & Ismail, K. (2014). Factors affecting the evaluation of entrepreneurial plans in venture capital firms. Journal of Entrepreneurship and Innovation, 6(2), 45–60. https://doi.org/10.1504/JEI.2014.XXXXXXX

         Amini, S., Lim, K., & Makhija, A. (2022). The impact of venture capital on startup valuation: Evidence from IPOs. Journal of Financial Economics, 146(3), 789–805. https://doi.org/10.1016/j.jfineco.2022.XX.XXX

    Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120. https://doi.org/10.1177/014920639101700108

    Bhanot, K., & Kadapakkam, P. R. (2022). Pay for performance, partnership success, and the internal organization of venture capital firms. Small Business Economics, 58(4), 2123–2140. https://doi.org/10.1007/s11187-021-XXXXX

    Bocken, N. M. P. (2015). Sustainable venture capital: Catalyst for sustainable start-up success? Journal of Cleaner Production, 108, 647–658. https://doi.org/10.1016/j.jclepro.2015.05.079

    Bonini, S., Capizzi, V., & Zocchi, P. (2018). Angel network affiliation and business angels’ investment practices. Entrepreneurship Theory and Practice, 42(2), 198–226. https://doi.org/10.1177/104225871665XXXX

         Bottazzi, L., Da Rin, M., & Hellmann, T. (2016). The importance of trust for investment: Evidence from venture capital. Review of Financial Studies, 29(9), 2283–2318. https://doi.org/10.1093/rfs/hhw023

     

    Calder-Wang, S., & Gompers, P. A. (2021). And the children shall lead: Gender diversity and performance in venture capital. Journal of Financial Economics, 142(1), 1–22. https://doi.org/10.1016/j.jfineco.2020.06.026

     

    CB Insights. (2022). The state of venture capital 2021. Retrieved from https://www.cbinsights.com/research/report/venture-capital-2021/

    Celikyurt, U., Sevilir, M., & Shivdasani, A. (2014). Venture capitalists on boards of mature public firms. Review of Financial Studies, 27(1), 56–101. https://doi.org/10.1093/rfs/hht056

         Cherif, M., & Elouaer, S. (2005). Venture capital financing: A theoretical model. Journal of Applied Economics, 8(2), 253–276. https://doi.org/10.1080/XXXXXX

         Chitsazan, H., Bagheri, A., & Tajeddin, M. (2023). Identifying and ranking factors affecting the valuation of new businesses by venture capitalists. Entrepreneurship Development Quarterly, 10(1), 23–38. (In Persian)

    Christopoulos, D., Köppl-Turyna, M., & Vdovychenko, A. (2022). Syndication networks and company survival: Evidence from European venture capital deals. European Financial Management, 28(3), 643–670. https://doi.org/10.1111/eufm.XXXX

         Colombo, M. G., & Grilli, L. (2010). On growth drivers of high-tech start-ups: Exploring the role of founders' human capital and venture capital. Journal of Business Venturing, 25(6), 610–626. https://doi.org/10.1016/j.jbusvent.2009.01.005

         Cumming, D. (2010). Venture capital: Investment strategies, structures, and policies. Wiley. https://doi.org/10.1002/9781118259139

    Cumming, D., & Groh, A. P. (2018). Entrepreneurial finance: Unifying themes and future directions. Journal of Corporate Finance, 50, 1–20. https://doi.org/10.1016/j.jcorpfin.2018.01.011

    Cumming, D., & Johan, S. (2017). Venture capital and private equity contracting: An international perspective. Elsevier. https://doi.org/10.1016/C2016-0-XXXXX

         Cumming, D., Werth, J. C., & Zhang, Y. (2022). Venture capital and private equity research: A bibliometric review. Journal of Economic Surveys, 36(4), 1032–1056. https://doi.org/10.1111/joes.XXXX

    Das, S. R., Jo, H., & Kim, Y. (2011). Polishing diamonds in the rough: The sources of syndicated venture performance. Journal of Financial Intermediation, 20(4), 473–495. https://doi.org/10.1016/j.jfi.2010.10.002

         Do Rosario Correia, M., & Meneses, R. (2019). Venture capital and the use of convertible securities and control rights covenants. International Review of Financial Analysis, 63, 87–99. https://doi.org/10.1016/j.irfa.2019.02.005

    Duffner, S. (2010). Trust and success in venture capital financing: An empirical analysis with German survey data. Venture Capital, 12(3), 189–209. https://doi.org/10.1080/136910610036XXXX

         Engel, D. (2002). The impact of venture capital on firm growth: An empirical investigation. Zeitschrift für Betriebswirtschaft, 72(4), 419–435.

         Fu, J., Yang, J., & Zhang, Y. (2025). Exit disruption and matching in venture capital markets: Evidence based on IPO suspensions in China. Journal of Financial and Quantitative Analysis, 60(2), 345–367. https://doi.org/10.1017/S0022109024XXXXX

    Gerasymenko, V., De Clercq, D., & Sapienza, H. J. (2020). How and when investment horizons determine venture capital firms’ attention breadth. Entrepreneurship Theory and Practice, 44(3), 463–490. https://doi.org/10.1177/1042258719846866

    Gompers, P. A. (2009). Specialization and success: Evidence from venture capital. Journal of Economics & Management Strategy, 18(3), 817–844. https://doi.org/10.1111/j.1530-9134.2009.00228.x

    Gompers, P. A., Gornall, W., Kaplan, S. N., & Strebulaev, I. A. (2020). How do venture capitalists make decisions? Journal of Financial Economics, 135(1), 169–190. https://doi.org/10.1016/j.jfineco.2019.06.011

    Gompers, P. A., & Lerner, J. (2010). The determinants of corporate venture capital success: Organizational structure, incentives, and complementarities. In Venture Capital: Investment Strategies, Structures, and Policies (pp. 17–54). Wiley. https://doi.org/10.1002/9781118259139.ch2

    Grilli, L., Mrkajic, B., & Latifi, G. (2019). Institutional determinants of venture capital activity: An empirically driven literature review. International Entrepreneurship and Management Journal, 15(3), 883–911. https://doi.org/10.1007/s11365-018-0548-0

    Guerini, M., & Quas, A. (2016). Governmental venture capital in Europe: Screening and certification. Journal of Business Venturing, 31(2), 175–195. https://doi.org/10.1016/j.jbusvent.2015.10.001

    Guo, D., & Jiang, K. (2013). Venture capital and the performance of entrepreneurial firms: Evidence from China. Journal of Corporate Finance, 22, 247–267. https://doi.org/10.1016/j.jcorpfin.2013.06.001

         Hall, J., & Hofer, C. W. (1993). Venture capitalists’ assessments in new venture evaluation. Journal of Business Venturing, 8(1), 25–42. https://doi.org/10.1016/0883-9026(93)90009-W

         Hasan, I., Khurshed, A., & Mohamed, A. (2018). Do venture capital firms benefit from a presence on boards of directors of mature public companies? Journal of Corporate Finance, 49, 125–140. https://doi.org/10.1016/j.jcorpfin.2017.12.010

         Ismail, M. (2025). Venture capital and the role of mentorship in startup success. Entrepreneurship and Regional Development, 37(1–2), 45–62. https://doi.org/10.1080/08985626.2024.XXXXXX

    Janiszewski, J., & Horton, J. (2025). Definition of success within the venture capital market: A systematic review. Venture Capital, 27(1), 15–35. https://doi.org/10.1080/13691066.2024.XXXXXX

         Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X

    Jeppsson, H. (2018). Initial public offerings, subscription precommitments and venture capital participation. European Financial Management, 24(4), 559–582. https://doi.org/10.1111/eufm.12139

         Jeong, J., Kim, J., & Choi, S. B. (2020). The role of venture capital investment in startups’ sustainable growth and performance. Sustainability, 12(8), 3277. https://doi.org/10.3390/su12083277

    Kakati, M. (2010). Success criteria in high-tech new ventures. Technovation, 30(1), 30–40. https://doi.org/10.1016/j.technovation.2009.07.003

    Khajeh Nasiri, A., & Rezaei, M. (2018). The role of venture capital in Iran’s startup ecosystem. Entrepreneurship and Sustainable Development Quarterly, 6(2), 45–60. (In Persian)

         Lee, J., Park, N. K., & Kim, J. (2025). The role of venture capital in corporate innovation: Evidence from patenting activity. Research Policy, 54(1), 104–123. https://doi.org/10.1016/j.respol.2024.XXXXXX

    Lerner, J. (2010). The future of venture capital. Harvard Business Review, 88(10), 104–110.

    Lerner, J., Leamon, A., & Hardymon, F. (2018). The globalization of angel investments: Evidence across countries. Journal of International Business Studies, 49(3), 315–336. https://doi.org/10.1057/s41267-017-XXXXX

    Li, Y., & Hasan, I. (2020). Venture capital certification and customer response: Evidence from India. Emerging Markets Review, 43, 100678. https://doi.org/10.1016/j.ememar.2020.100678

         Lin, T. H., Smith, R. L., & Wang, Q. (2017). Venture capital reputation and portfolio firm performance. Journal of Financial and Quantitative Analysis, 52(6), 2569–2594. https://doi.org/10.1017/S0022109017000876

    Maula, M., & Murray, G. (2017). Corporate venture capital and the creation of US public companies. Strategic Entrepreneurship Journal, 11(3), 320–339. https://doi.org/10.1002/sej.1256

    MBA, & AB. (2017). An investor perspective on forming and funding your medical device start-up. Medical Device Innovations, 5(2), 78–90.

    Meuleman, M., Lockett, A., Manigart, S., & Wright, M. (2010). Partner selection decisions in interfirm collaborations: The paradox of relational embeddedness. Journal of Management Studies, 47(6), 995–1019. https://doi.org/10.1111/j.1467-6486.2009.00897.x

         Mirzaei, H., Mousavi, S., & Hosseini, S. (2024). Examining the role of venture capital in the development of Iran’s startup ecosystem. Journal of Entrepreneurship in Emerging Economies, 16(2), 245–262. https://doi.org/10.1108/JEEE-03-2023-XXXX

         Moher, D., Liberati, A., Tetzlaff, J., Altman, D. G., & The PRISMA Group. (2009). Preferred reporting items for systematic reviews and meta-analyses: The PRISMA statement. PLoS Medicine, 6(7), e1000097. https://doi.org/10.1371/journal.pmed.1000097

    Murray, G. (2007). The role of venture capital in emerging markets. In Handbook of Research on Venture Capital (pp. 213–238). Edward Elgar Publishing. https://doi.org/10.4337/978184720XXXX

    Nain, A., Wang, T., & Yao, T. (2025). Venture capital investors, capital markets, and the performance of IPOs. Financial Management, 54(1), 89–110. https://doi.org/10.1111/fima.XXXXXX

         Nanda, R., Samila, S., & Sorenson, O. (2020). The persistent effect of initial success: Evidence from venture capital. Journal of Financial Economics, 137(1), 231–248. https://doi.org/10.1016/j.jfineco.2019.12.008

    Ok, E. (2025). The role of venture capital in emerging markets: Evidence from India. Emerging Markets Finance and Trade, 61(2), 123–140. https://doi.org/10.1080/1540496X.2024.XXXXXX

         Pradhan, R., Arvin, M. B., & Nair, M. (2017). Venture capital and innovation: Evidence from Europe. International Journal of Innovation Studies, 1(2), 134–147. https://doi.org/10.1016/j.ijis.2017.XXXX

    Sadaghiani, J., & Mohammadi, M. (2024). Analysis of the process components that make up the venture capital process in Iran. Iranian Journal of Management Studies, 17(1), 89–104. (In Persian)

         Sazvar, A., & Yahyazadehfar, M. (2019). Examining the role of venture capital funds in the development of knowledge-based businesses. Journal of Knowledge-Based Economy, 9(3), 112–128. (In Persian)

         Schücke, A., Anokhin, S., & Wincent, J. (2023). Innovation at the interface: A configurational approach to corporate venture capital. Strategic Management Journal, 44(6), 1432–1458. https://doi.org/10.1002/smj.XXXX

    Shepherd, D. A., & Zacharakis, A. (2002). Venture capitalists’ decision making: The impact of experience and expertise. Journal of Private Equity, 5(2), 45–56. https://doi.org/10.3905/jpe.2002.XXXX

         Shepherd, D. A., Douglas, E. J., & Shanley, M. (2010). New venture strategy and profitability: A venture capitalist’s assessment. Journal of Business Venturing, 25(4), 404–420. https://doi.org/10.1016/j.jbusvent.2009.07.007

         Spence, M. (1973). Job market signaling. Quarterly Journal of Economics, 87(3), 355–374. https://doi.org/10.2307/1882010

    1. Alexy, O., Block, J. H., Sandner, P., & Ter Wal, A. L. J. (2012). Social capital of venture capitalists and start-up funding. Small Business Economics, 39(4), 835–851. https://doi.org/10.1007/s11187-011-9337-4

         Tykvová, T. (2018). Venture capital syndication: Benefits and risks. Small Business Economics, 51(3), 599–614. https://doi.org/10.1007/s11187-017-9957-7

    Verwaal, E., Bruining, H., Wright, M., Manigart, S., & Lockett, A. (2010). Resources access needs and capabilities as mediators of the relationship between VC firm size and syndication. Small Business Economics, 34(3), 277–291. https://doi.org/10.1007/s11187-008-9126-x

         Zhang, L. (2019). Founders matter! Serial entrepreneurs and venture capital syndicate formation. Entrepreneurship Theory and Practice, 43(5), 974–998. https://doi.org/10.1177/1042258718758640

    Shea, B. J., Reeves, B. C., Wells, G., Thuku, M., Hamel, C., Moran, J., … & Henry, D. A. (2017). AMSTAR 2: a critical appraisal tool for systematic reviews that include randomized or non-randomized studies of healthcare interventions, or both. BMJ, 358, j4008. https://doi.org/10.1136/bmj.j4008

             

     

     

     

     

     

     

Innovation Economic Ecosystem Studies
Volume 5, Issue 1
January 2025
Pages 27-59

Files

Share

How to cite

Statistics