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Research methods in Entrepreneurship and Venture Capitalism


All business ventures involve a certain amount of risk. This is because even though one can forecast the likelihood of outcome in any business venture, the results are never certain. These risks stem from a wide range of uncertain parameters that are inherent in the development of any new venture. It is therefore important for various precautionary steps to be taken when starting out in the new venture so as to increase the chances of success. Historically, venture capitalists are successful less than 20% of the time. This implies a “problem of practice”, that is, even though extensive research is done prior to starting up the new venture, they still do not make the best decisions in the investment process. Comparatively, successful serial entrepreneurs open a string of businesses even though starting up fails 95% of the time. So is there a different way of perception and assessment of risk that is employed by serial entrepreneurs but not by venture capitalists? Is it possible to obtain further knowledge through the study of characteristics of decision making among successful serial entrepreneurs, which could be beneficial to venture capitalists in the development of a new business?

Is it possible for potential investors

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to make use of the specific entrepreneurial characteristics that have been identified in the study as an additional tool in their decision-making process? To bridge the practice gap noted earlier in this essay, the information gained from this study would serve as a vital resource for the venture capitalist and other investors in other sectors of the economy. This study aims at identifying and evaluating differences that emerge between venture capitalists and serial entrepreneurs. Also covered are specific traits that may determine how successful their approaches are, and the qualitative decision-making process that different parties engage in. In addition, the study will evaluate the risk elements that shape perceptions and characteristics that partly influence how future stakeholders and current serial entrepreneurs handle risk transference.


Problems with identifying and predicting the success of startup companies have led venture capitalists to search for measurable characteristics of nascent firm executives in addition to information about the firm’s product innovation and market impact. The principal aim of this research is to analyze and comprehend the factors that make it possible for serial entrepreneurs to be successful in their new business ventures. The research will entail the study of psychosocial factors that have facilitated the creation of stable and successful businesses among serial entrepreneurs. Applied to the study, will be the current theory of risk attitudes for both serial entrepreneurs and venture capitalists in an effort to identify and comprehend any differences in their perceptions that may contribute to the differences in the decisions that they make in the investment process.

My current research domain is to assist in identifying these characteristics by analyzing perceptions of risks in successful habitual entrepreneurs as compared to non-entrepreneurs and venture capitalists. I wish to identify characteristics in risk perception of successful habitual entrepreneurs to potentially assist in predicting nascent business outcomes and successful investment by venture capitalists. It is also my hope that the perception of risks can be measured and revealed to single event entrepreneurs and non entrepreneurs in an effort to develop an awareness of different risk analysis of entrepreneurial clusters by venture capitalists. This study will also attempt to reveal the differences in the analysis of perception of risks and resilience either objectively or subjectively by several venture capital firms and what causes these differences. The practical purpose is to assist venture capitalists and pre-entrepreneur practitioners in analyzing how successful habitual entrepreneurs tolerate risk in nascent firm building despite potential deleterious lifestyle changes and financial failure, and how they convince others that they can succeed.


Before any research is carried out, it is important for the interviewer to carefully consider the methods of research that are going to be applied. These considerations are based on factors such as time that will be taken, the cost of carrying out the research among other resources that are available for carrying out the research (Beiske 2007, p. 1). The research strategy and research methods that will be employed in this study will to a very large extent be determined by their ability to provide an adequate answer to the following key questions that the research seeks to answer:

1.      Do certain characteristics of risk perception differ between serial entrepreneurs and venture capitalists?

2.      Do these potential differences affect the decision making process of the venture Capitalist in investing in a new venture?

3.      Do entrepreneurs who become venture capitalists differ in their perception of risk of new ventures as compared to non former entrepreneur venture capitalists?

4.      What are the characteristics of entrepreneurs that are considered by venture capitalists in the assessment of new ventures?

5.      What affect, if any, does risk perception have on the entrepreneurial process?

6.      What role does risk perception play in the process of transference of financial risk from the entrepreneur to the venture capitalist?

7.      How does previous success in nascent ventures by a serial entrepreneur affect his or her risk perception and the decision making by the venture capitalist investing in the proposed new venture?

8.      Do serial entrepreneurs who become venture capitalist make better or worse decisions in the financial investing of new ventures?

9.      Do serial entrepreneurs who become venture capitalists differ in their perception of risk in the investment of new ventures as compared to non former entrepreneur venture capitalists?

There is a wide range of research methods that can be used to obtain responses for this study. These are the interviews, questionnaires, case studies and direct observation (Beiske 2007, p. 1). For this research, a qualitative approach will be used via individual interviews, allowing conversation and phenomenological narrative with participants. Naturally flowing dialogue will be initiated with the framework of scripted, open ended questions and reflective feedback.

Interview candidates will be serial entrepreneurs who have developed multiple opportunities in the past ten years in different markets and venture capitalists that have been former serial entrepreneurs, single entrepreneurs or have had no identifiable entrepreneurial background. This study will first ask entrepreneurs and venture capitalists to identify characteristics that are important for an entrepreneur to successfully find and exploit a marketable product or service through the establishment of a startup firm. Second, the study will compare the entrepreneurs’ responses and those of the venture capitalists. Third, the study will compare what the two groups consider important factors in the assessment of risk in venture capital funding decisions. Finally, a future quantitative study will compare responses on a standardized risk assessment questionnaire of successful serial entrepreneurs and venture capitalists.

The following section provides an in depth analysis of the research methods, providing the rationale behind them and assessing the advantages and the disadvantages associated with them and the criteria which is used to assess the viability of the strategy.

Individual interviews

Individual research as a qualitative research method tries to answer the research question by analyzing the responses of the interviewees. The aim of a qualitative research interview is therefore to achieve factual information and obtain meaning from responses that will shed light on the topic being studied. An individual or one- on-one interview enables the interviewer to get the actual story behind the experiences of the participant as opposed to getting simple structured responses. The interviewer can pursue in- depth information from the responses of the interviewee and this makes the study even more successful. Since, interviews are of a personal nature, the interviewer gets to work directly with the respondent and this is very advantageous since more information may be gained this way (Valenzuela & Shrivastava n.d, Screen 2-3).  The success of an individual interview as a research method relies heavily on the ability of the respondents to give accurate answers that are as comprehensive as possible regardless of the formatting of the questions (Breakwell & Hammond 2006, p. 247; Gubrium and Holfstein 2001).

My decision to choose individual interview as the preferred data collection method is due to its high likelihood to yield accurate data and its feasibility compared to the other research methods. This is because unlike the questionnaire or any other data collection method, the respondent can seek clarification if he or she does not understand the question. Also, the interviewer will be able to seek clarification where the response has not been clearly understood. This makes the responses highly relevant to the question being asked and adds meaning to the whole data collection method (Breakwell & Hammond 2006, p. 247).

Individual interview as a research method typically allows for the interviewer to interact with the respondent on a more personal level, making it easy to obtain in depth information than would not be obtained for instance, when using a questionnaire which is typically structured and does not allow the respondents much room to adequately express themselves. Also unlike questionnaires, the interviewer will be able to probe the respondent further thereby obtaining responses which he or she would otherwise probably not have gotten or to ask further questions which clarify a particular response instead of the interviewer having to rely on his or her own interpretation of the response which may be inaccurate (Valenzuela and Shrivastava n.d, Screen 3). A case study on the other hand, will limit the data obtained to only one point of view yet for this research it is important for that as many points of view as possible are obtained.

 Lastly, direct observation as a data collection method may not be viable in the long run since it will involve having to observe several serial entrepreneurs and venture capitalists as they start a new business project from scratch and this may take even years for the research to be concluded. Thus individual interviews remain the best data collection method for this study compared to the other data collection methods. Through interviewing my respondents, I have a certain degree of flexibility in using my knowledge which I can apply to them in order to get more accurate and adequate information. Through my interpersonal and communication skills, I will be able to obtain responses especially where the respondent is not being cooperative. Furthermore, individual interviews will give me a direct and more personal experience with the serial entrepreneurs and the venture capitalists, providing me with a deeper understanding of their business processes as opposed to other data collection methods. However, like any other research method, individual interviews have their own advantages and disadvantages which I will highlight in the following section:

Advantages of individual interviews

Interviews will make it easier to obtain information (Valenzuela and Shrivastava n.d, screen 3). Bauer and Gaskell (2000, p. 48) state that from a personal interview, it is possible for the interviewer to obtain a much richer response especially when it comes to a detailing of personal experiences; which is exactly the type of information that is being sought from the serial entrepreneurs and venture capitalists. The interview seeks to understand the personal experiences of the two parties when starting a new investment in order to understand their perception of risk and identify the practice gap that would lead to the different outcomes in the investment ventures of the two parties. Also, the interviewer can elicit responses through probing while focusing on as particular important piece of information. So if the respondents are not quite answering the questions the way they, I will be able to probe them gently into answering these questions and giving the information that is most relevant. Also, the responses of the interviewee can be used in relation to other relevant characteristics of the interviewee such as their expressions, through which one can tell the emotions that the respondent attaches to the questions being asked and the issue at hand (Bauer and Gaskell 2000, p. 48). A more personal kind of communication is obtained during an individual interview which makes it possible to obtain a richer response. Also, the nature of individual interviews makes the respondents feel the need to elaborate their responses to the interviewer which enriches the conversation (Morgan 1997, p.10-11).

Brinck et al (2002, p. 85) point out that the principle benefit of an individual interview is the fact that the person being interviewed will not be subjected to bias by other people, as may occur, say, in a focus group which tends to foster groupthink. When a group of professionals are put together to share information concerning their businesses, chances are that they may tend to exaggerate their stories, maximizing on their strengths and minimizing their weaknesses in order to appear knowledgeable to the interviewer as well as their peers. Thus the venture capitalists for instance, may make themselves appear to be more of risk takers in front of their peers if they feel that this gives one a more positive business image as opposed to sounding risk averse. This will give inaccurate results and the research question may not be answered but in an individual interview, the respondent may be more hones in his or her response. The chances for accuracy of the information that is given are higher when the respondents are able to give their responses from their own point of view without any undue influence from other members within their category. Thus individual interview remains the preferred data collection method.

Sewell (n.d) has also pointed out that a qualitative interview permits the respondent to give a proper and more personal account of his or her experience without being restricted to specific structured questions. The respondent may wish to enrich his or her responses with anecdotal evidence but a structured questionnaire may not allow him this chance. Also, a focus group may be working on a limited time frame and it will not be possible for all the respondents to give their anecdotal responses which are very crucial in determining the true picture in the decision making process. Other methods which may give the required information such as case studies and direct intervention may take too much time and direct observation in particular may not give the desired response since it will be based only on my perception of the entire situation which may not be accurate since I am not the one actually engaged in the decision making process and at a third party point of view, I many not understand why a particular decision is being made unless I am actually involved in the decision making process.

The importance of the serial entrepreneurs giving their own anecdotal experiences to provide accurate information cannot be overemphasized. In deed, the answers to the questions being asked may not be obvious even to the respondents themselves and will only become more apparent when they start giving their anecdotal responses with the interview questions slowly guiding them to give the required responses. The manner in which this interview is designed will allow the respondents much room to give their own experiences and sort of guide the interview process which enables the respondents to feel a bit more relaxed and open; and therefore more likely to give the desired response. An individual interview therefore offers a higher likelihood of credible responses and it also adds face validity to the data collected (Sewell, n.d).

Disadvantages of individual interviews

The success of the individual interview lies in the ability and willingness of the interviewee to respond to the questions adequately and to give accurate information. However, it is possible that the respondent may choose to lie or to give inaccurate information even when the format of the interview has been structured in such a way as to avoid such an occurrence. Generally, risk taking is considered by many as one of the qualities of a successful business man or woman. Thus even the respondents who are risk averse may downplay this as they seek to portray themselves as having good business acumen. It is also possible that the respondents may not like me as a researcher and for this reason will not respond well to the questions. They may wish to sabotage the research, probably because they do not like the idea behind it or do not like the questions being asked. It is also possible that the responses may feel ashamed to disclose certain truths that would shed light on the research question that the interview seeks to answer. They may not be ready to admit that some decisions they took were the reason behind the failure of their business venture and this means that they will provide biased and inaccurate information. Also, it is possible that the respondents will give inaccurate information largely because it is not easy for them to recall some specific details that are being requested of them or if they have not understood the question properly, they may give an inaccurate response (Breakwell & Hammond 2006, p. 247).

There is a potential danger for individual interviews to be perceived as intrusive by the respondents. The serial entrepreneurs and venture capitalists may feel that the interview requires them to delve too much on their business secrets and information and what’s more, to share them with a complete stranger! Also, individual interviews are subject to the personalities of the respondents, their mood among other interpersonal dynamics as opposed to other methods such as using a questionnaire. Thus if they are naturally quiet and introverted people or if they are people who have difficulty expressing themselves they may not give the adequate information. Generally, interviews are considered among the most expensive and time consuming data collection method. It takes more time and effort to analyze and interpret information that has been obtained through an interview and there is always the risk of interviewer bias (Sewell, n.d).

Standardized risk assessment questionnaire

As aforementioned, a future quantitative study will be carried out so as to compare responses of the serial entrepreneurs and the venture capitalists on a standardized risk assessment questionnaire of successful serial entrepreneurs and venture capitalists. Questionnaires generally followed a structured format to collect data or information for analysis and are used as an important tool in quantitative research for which they are suited (Dornyei 2002, p.11)

Advantages of using questionnaires

Due to the short sentenced and the structured nature of a questionnaire, it can cover a wide range of areas within a very short period of time. A questionnaire also makes the respondents to be more honest in the responses that they give to the set of questions since their identity will not be known. It also entails very little cost and is relatively easy to administer and to analyze since the responses are based on some standardized structure. Other advantages include the ability to cover a large sample which makes the likelihood of obtaining more accurate information. Questionnaires are also easily administered (Petter & Davis 2002, screen 5; Milne 1999, p.52; Stommel & Wills p.245).

Disadvantages of questionnaires

Several disadvantages for using questionnaires as a data collection method have been cited. First and foremost, questionnaires do not provide room for the respondent to give adequate information and as such, the results may give very little depth and meaning to the information that is provided. Because the questionnaire is structured, the respondents may give a poor response since they do not have enough room to express themselves (Petter & Davis 2002, screen 5; Milne 1999, p.52).


Bauer, M and Gaskell, G 2000, Qualitative researching with text, image and sound: a practical handbook, SAGE, Thousand Oaks, CA

Beiske, B 2007, Research Methods: Uses and Limitations of Questionnaires, Interviews and case studies, GRIN verlag, Munich, Germany

Breakwell, G.M, Hammond, S and Smith, J.A 2006, Research methods in psychology, SAGE, Thousand Oaks, CA

Brinck, T,  Gergle, D and Wood, S.D, 2002, Usability for the web: designing web sites that work, Morgan Kaufmann, San Francisco, CA

Dornyei, Z 2002, Questionnaires in second language research; construction, administration and processing, illustrated edn, Taylor & Francis, London

Gubrium, J.F and Holstein, J.A 2001, Handbook of interview research: context & method, SAGE, Thousand Oaks, CA

Milne, J 1999, Questionnaires: some advantages and disadvantages, Evaluation Cookbook p.52

Morgan, D L 1997, Focus groups as qualitative research, SAGE, Thousand Oaks, CA

Petter, S and Davis, A 2002, ‘Quantitative Research Methods: Questionnaires’, viewed May 14, 2009 http://www.cis.gsu.edu/~dstraub/Courses/CIS%209280/2004/questionnaire2002.ppt

Sewell, M n.d, ‘The use of qualitative interviews in evaluation’, The University of Arizona, Tucson Arizona, viewed 14 May 2009 http://ag.arizona.edu/fcs/cyfernet/cyfar/Intervu5.htm

Stommel M & Wills C, 2003, Clinical research: concepts and principles for advanced practice nurses, Lippincott Williams & Wilkins, Philadelphia, PA

Valenzuela and Shrivastava, n.d, ‘Interview as a method for qualitative research’, viewed May 14, 2009 http://www.public.asu.edu/~kroel/www500/Interview%20Fri.pdf

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