The Venture Capital Investment Process: Theory, Practice, and Decision-Making

Academic models of venture capital explain why industry instruments take their specific forms; however, because they rely on equilibrium assumptions, early-stage investing rarely meets the conditions required for their predictions to hold. This thesis investigates how far professional practice departs from these theoretical models and what this gap reveals about real-world investment decision-making. The analysis combines a structured literature review with a dedicated repository of practitioner documents—sourced from investors, founders, and legal or market intermediaries—alongside recent market data on financing rounds. Professional practice is reconstructed across the five stages of the investment process, from deal origination to post-investment governance, and then focuses on four critical decisions characterized by asymmetric consequences, low reversibility, and incomplete information: the timing of capital raising, valuation and dilution costs, the tradeoff between growth and control, and the choice of financing instrument. Each comparison is categorized using a purpose-built typology of divergence that distinguishes direct confirmation, unmodeled extension, perspective inversion, and contradiction. Based on these findings, the thesis develops an integrative framework designed to connect academic theory with practical application for both founders and investors during a financing round. Finally, the thesis demonstrates the practical utility of this framework by applying it to one of the four key decision points.