Abstract:
The relationship between entrepreneurs and venture capitalists (VC) has frequently been
researched from the VC's point of view. As a result, VCs have implemented a number of
techniques to reduce their own information asymmetry. However, because the VC is a
professional investor, this dyad has a two-sided information asymmetry with regard to the
investing process. With a focus on the signals sent by VCs that led to the reduction of this twosided
information asymmetry, the study applied a signalling theory approach to examine the
experiences of entrepreneurs during the investment process. The results demonstrated that
entrepreneurs take a variety of steps to prepare before beginning the financing process. Through
the investment, entrepreneurs were able to identify and evaluate signs that could ultimately
result in greater trust and better process clarity. Additional value additions made during the postinvestment
period provide additional signals, which may lead to a relationship with a better level
of overall quality.
