Venture Capital

How can attention help in venture success?4 min read

April 24, 2024 3 min read


How can attention help in venture success?4 min read

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The research paper by Alex Makarevich, titled Attention to alliances: The role of attention relational embeddedness and concentrated governance in the success of U.S. venture capital syndicates, published in 2024, explores the interplay between organizational attention and the success of inter-firm alliances, specifically within the context of U.S. venture capital (VC) syndicates. The study analyzes U.S. VC syndicates from 1980-2020 and confirms hypotheses on venture success factors.

For those who might have forgotten, a venture is an activity, usually in business, that involves a big risk of failure. For instance, someone has an excellent idea for a business but needs more money, and other assistance to make it happen. So, this entrepreneur asks others to invest money in their concepts, and in return, investors might get a share of the business or a part of the revenue later on.

However, starting a new business comes with several challenges. One significant risk is losing money. Another is that customers’ preferences and trends can change quickly, which might end up with the business selling irrelevant products. One more is facing tough competition from big companies and other new businesses just starting. These factors contribute to a high failure rate among startups, as many struggle to find their ground in a constantly evolving market and to attract enough customers to become profitable.

The author theorizes that sharing a history of collaboration boosts the positive effect of attention on alliance success, allowing partners to build on familiarity, operational cohesion, and trust. Additionally, the research investigates the influence of governance structure within syndicates. Concentrated governance helps overcome member differences, ensuring efficient decision-making and resource allocation. Still, depending on the governance structure’s concentration level, its interplay with attention could booster or diminish venture success.

How can attention help in venture success?

At the heart of this study lies the hypothesis that greater attention from syndicate members significantly increases the likelihood of a venture achieving an IPO. Alex Makarevich defines ‘Organizational attention’ as a firm’s focus of time and effort on specific issues, problems, opportunities, threats, and particular skills, routines, programs, projects, and procedures.

The Attention-Based View (ABV) is an academic behavioral concept from the Carnegie School. It suggests that organizational outcomes directly result from where leaders decide to pay attention. It is similar to a video game in which the player is compared to the strategic decision-making process of an organization. Within this paradigm, the direction of an individual’s gaze in a game — whether left or right — determines their actions and interactions within that specific game area. Similarly, the ABV posits that the strategic points executives choose significantly influence the organization’s decisions and overall performance.

In alliances, it’s essential to bring different things to the table, watch out for anyone not doing their part, set up rules for working together, and remember how they’ve gotten along in the past. However, professionals realized that not paying enough attention to how each individual acts and works with others affects the success of the team. So, they’re now looking at how paying attention to behavior can make these company team-ups even better, filling in a missing piece of the puzzle.

The study underscores the strategic importance of cultivating attention, nurturing relational networks, and carefully considering governance structures within VC syndicates. Venture capital firms and startups should optimize collaborative strategies to enhance the probability of success.

What else?

Soft skills will also be helpful in a venture’s success. As AI reshapes the landscape of work and personal interaction, the emphasis shifts toward the nuanced capabilities that humans have. These include emotional intelligence, critical thinking, adaptability, and the ability to foster collaboration in diverse teams, like with attention in venture capital syndicates. In a future where technological prowess is a given, the differentiator lies in the human capacity for empathy, creativity, and ethical decision-making. Such skills enable individuals to navigate complex social and organizational contexts, complementing AI’s efficiency and analytical capabilities.

You can learn more about it in a dialogue facilitated by Anastassia Lauterbach with Aleksandra Przegalińska. She argues that while AI and technology are powerful tools for innovation and efficiency, the essence of organizational success lies in human qualities. This holistic approach underscores a future where attention to technological advancements and soft skills development is paramount for success.

Alex Makarevich – Associate Professor at the Department of Management at California State University, East Bay.

Alex holds an M.Phil. from Oxford and a Ph.D. in Economic Sociology from Stanford. He teaches Strategy and Entrepreneurship and coaches MBA teams in venture investing. He brings experience in entrepreneurship, angel investing, startup advising, and research on the U.S. venture capital industry.

Anastassia Lauterbach – Managing Director at The ExCo Leadership Group & Professor of Artificial Intelligence, Data and Digital Businesses at Management Center Innsbruck (MCI).

With experience in CEO succession, legacy turnarounds, and establishing partnerships with major tech companies, she holds multiple board and advisory roles, including Non-Executive Director at Aircision and Freight One, and memberships with Nasdaq and the Diligent Institute. Lauterbach has significantly contributed to business development and innovation, particularly in AI and cybersecurity, through her leadership at 1AU-Ventures and as an author and speaker.