Taming the Dragons - A study of the effect of innovation networks on venture capitalists' investment decisions in Dragons' Den

Abstract: In this paper, we strive to bridge two areas of marketing and entrepreneurship research: that on evaluation criteria used by venture capitalists (VCs) and that on the importance of networks for the success of start-up ventures. We make a first attempt to combine these by performing a case study of the impact that the innovation network and its dynamics had on three VCs' assessments of one start-up. In our analysis we look at the static appearance of the network as well as at three dynamic network-building capabilities - interessement, co-creation, and choice of spokespersons. We also argue that the dynamic network-building is more important for this particular venture since it is in an early phase of development. We find that the business we study has benefitted from an extensive innovation network and the founders' strong network-building skills. The entrepreneurs also see it as important to demonstrate the full scope of their network connectivity in the pitch while the VCs as a contrast focus almost entirely on the choice of spokespersons, expressed in the entrepreneurs' personality traits. We have thus identified two gaps - one between theory and the VCs' evaluation criteria, and one between their criteria and what the entrepreneurs believe these to be. We discuss whether the cause of these gaps could be the specific format of Dragons' Den, but in order to test this hypothesis, further research is necessary.